Rocky Lalvani | Making Sure Your Business Pays You

Do you think of profit as an afterthought? Is how much cash will be on your bottom-line always a guessing game? It’s all too common but, says Rocky Lalvani, it’s a recipe for disaster. 

It is possible to make a reliable profit without totally changing how you do business, says this business consultant and Profit First expert. 

You just need to “put profit first” to ensure you and your team get paid – and you still cover your expenses. A regular accountant or bookkeeper can’t get you there. 

If you’re always intimidated – even scared – when looking at your financials, this is a must-listen interview. 

Tune in to find out…

  • Why you must account for Parkinson’s Law
  • The thing 80% of business owners get all wrong about their financials
  • How to find opportunity in a time of crisis
  • The most important factor in any business, in any industry
  • And more

Listen now…

Mentioned in this episode:

Transcript

Giuseppe Grammatico: Welcome to the Franchise Freedom Podcast. I’m your host Giuseppe Grammatico, your franchise guide, and today we have a very special guest. Today we are speaking with Rocky Lalvani. Rocky is from Profit Comes First where they help business owners who don’t like to look at their business financials make better financial decisions. The Profit First System ensures you don’t have to change your habits to learn complicated accounting principles. Hundreds of thousands of businesses have achieved the ability to take profit distributions. Rocky, I wanted to welcome you to the show today.

Rocky Lalvani: Thank you so much, Giuseppe. I’m honored to be here.

Giuseppe: Great, I appreciate it. So Rocky, I like to always ask all of our guests the first similar question that, you know, what, fill us in a little bit on your background. How did you get into this business and what does that journey look like?

Rocky’s Entrepreneurial Journey

Rocky: So it’s been a lifelong journey for me. I’m an immigrant to the United States. I came here when I was a little kid. My parents brought me to create the American dream. And as we were growing up, they literally had to start over again in their 40s. And I watched them and all their friends kind of climb that financial ladder. And in doing that, they used to have a lot of conversations and his kids, we just got to kind of listen in and learn the principles of building wealth.

They had already done it once in their life. And now they essentially had to start over and do it again. So we were always having these money conversations. And I don’t know, for whatever reason, from the time I was young, I was always interested in money, and I had this goal of becoming a millionaire. And I was always learning about money. But I had a struggle internally.

When I got out of college it was like, I didn’t want to go into the financial selling space. And I didn’t have enough knowledge to know more than that because I didn’t like a lot of the products they were selling. And so I kind of went away from what was naturally a good fit and just ended up in a whole different kind of career. And I spent a good part of my life in corporate and in sales, and I had a wonderful run, and I put my wealth-building principles into play.

And I think one of the things that was always underlying in my, in the back of my mind, and I think one of your guests recently talked about it Mark Miller was, I don’t want to be that guy who’s in his early 50s and loses his job and essentially loses everything, you know, from the top of his career and falls apart. And so I knew I had to build wealth and that’s what I worked on. And then as I got closer to that point, I was like, well, I originally thought I would just retire. And as I got closer to that I was like, I don’t know if retirement’s the right answer because you essentially stop growing right?

It’s kind of like, I found out that that wasn’t what I wanted to do. So then I really had to do a lot of self-work to say, what is it that I want to do? And what am I good at? And what is the world willing to pay for? And what I learned through that whole process was about financial coaching, which I had never been aware of. And then I went through a whole long journey, pivoting through that until I eventually ended up with the Profit First System and in hooking up with Mike Michalowicz.

Giuseppe: That’s great. Yeah. And in our conversations, that’s a very important point. When we talk about profit, we talk about financials. A lot of existing as well as brand new business owners. Their knowledge, their experience with financials is just not where it needs to be. I talk to business owners on a weekly basis and many of them treat cash flow the same as profit or vice versa.

And they’re just not aware. They’ve just, you know, whatever’s coming in, that money is being spent. And they’re not necessarily looking at a profit and loss. So, with that being said, if you could tell us a little bit more about, you know, Profit Comes First, your company, the company you’re affiliated with and just some of the services you have to offer because I find that really, really interesting.

Sales Minus Profit Equals Expenses

Rocky: And so that, to me, was a big shock. I just always assumed that people who ran businesses understood the business of business. And what I found out is that 80% of business owners don’t look at their numbers, they look at their bank balance. 15% of them look at their reports, but don’t fully understand them. And there’s probably 5% of business owners that have it down and they’re the ones who really thrive.

And that’s why some businesses thrive and other businesses don’t. I help the 95 percent who don’t look at their numbers or don’t understand them thrive. Mike Michalowicz is an entrepreneur and like all entrepreneurs, you know, we go through ups and downs and struggles and he had early success, cashed out of his business, you know, the success story. And then he essentially blew all his money. And he hit rock bottom. And he said he didn’t want to have to do that again and he wanted to create a system that worked.

And part of what he did was he looked out there at the world and said, Why are we all struggling? And part of it is because accountants and bookkeepers or reporters, they put the numbers where they need to go so that you can tell the government how much you owe in taxes, but they’re not there to teach you how to build wealth. They’re not going to help you build wealth, unfortunately. Some of them do, but the majority don’t. They all work have that standard formula that I’m sure you’re well familiar of, which is sales minus expenses equals profit.

And that means profit comes last. But if you’re in business, profit should come first. And so what Mike did was changed the formula to sales minus profit equals expenses. So essentially, you take profit first right off the top and you actually remove it from your business. And, you know, during these days and times, you see how important it is to have that money outside your business so that when things don’t go as expected, you have the ability to get through that.

The other thing he realized is it’s very hard for us to change habits, right? We talk about diets. Every, nobody wants to be on a diet. Nobody wants to do the things you have to. So how do we use our habits to better make decisions? And one of the things he found was Parkinson’s Law. And basically what Parkinson’s Law says that things expand to the resources allocated to them.

So for example, if you say to somebody, I have a project and I have $10,000 to spend, they’ll spend $10,000. But if you say I have a project and I have $1,000, to spend, and it’s that same project, you’ll figure out a way to get it done for $1,000. And the same thing, if I give you, I have a report to do and you give me a week to do it, I’ll take a week to do it. But if I have a report to do, and you give me an hour to do it, we’ll figure out a way to get it done in an hour. And that’s an important concept in, if we look at that, how do we then spend less?

And most business owners look at their bank balance and they say, okay, there’s money to spend, I’m gonna go spend it. What they don’t remember is that, Oh, I forgot to pay taxes. Oh, I forgot this big bill coming up, oh, I’ve got payroll. And they get themselves stuck because they aren’t focused on the numbers. What the Profit First System does is it allocates all the money as soon as it comes in so that when you look at your bank balance, you’re seeing what’s truly there to spend, not money that’s already essentially been spent, like taxes, but you haven’t written the check yet.

Giuseppe: Right. Yeah, so I cannot agree with you more. And to a new business owner, whether it be a franchise or non-franchise, this is things that just aren’t taught, right? It’s things that we’re, unfortunately figuring out the hard way, including myself. So just because you’re with a system, that there’s going to be a system as far as basic financial accounting and reporting but things like this, there’s a huge demand, a huge need. And that’s why I was really looking forward to the call and show today is to just to get the word out that there’s, there are resources. There’s help out there in order to get your business to become more profitable.

So really good stuff there. One thing I found very interesting on one of our first calls was we had talked about, or I had mentioned, work-life balance and you had said you know what, we don’t refer to as work-life balance. We refer to it more as harmony. It’s just something that kind of, that struck me. It’s something I remember from our last call. Can you talk a little bit about that? Because that’s a topic that comes up quite a bit. How do I balance things? And I just liked the way you kind of explained it. Can you talk a little bit more about that?

It’s Kind of Like Music

Rocky: Sure. I spent so, you know, this whole journey to figuring out my life, and one of the things I did was start a podcast. And one of the things in doing that was to say, Well, what do we need in life, right? And I think it’s universal. We can all say it slightly differently, but we need time, we need money, we need to be healthy, we need to have great relationships, right? With our kids, our wives, with people. And we need to somehow be connected to this universe. And so I started off talking about balance with all these things.

And what I found is that when you say the word balance, everyone thinks everything has to be equal. And that’s not good because you can’t have all these things equal, and in life, they’re never going to be equal, right? We all go through different times in our life, right? When our kids are young, they demand more attention and they take up a lot more of our time. And so it’s very, very hard for people to be balanced. And in one of my guests, he said, You know what, life is more like harmony. It’s kind of like music, right?

All the different parts of life are going on But at different times, different parts are louder than others. They’re more important. And it’s figuring out for yourself, how do all the parts of my life fit together in alignment with what I want out of life and what’s important to me? And how do I make all of that work? And then being intentional with that and learning to do it. I think most people live out of harmony. They live, you know, if you want to use the word balance, they live out of balance even in that they’re so far, you know, most people are so far running into work, they forget about the rest of their lives.

And then you get to a point and you look at your health and it’s like, it’s way out of whack because little by little you’ve gotten heavier. I know I went through that. I got pretty heavy and I had to make dramatic lifestyle changes to get back in shape. But I think that word harmony helps you to realize you don’t need to be perfect. But what are the parts of your life that you want to go together? And how do you keep them so that the song of your life sounds good?

Giuseppe: I love it. Very well put. What is the name of your podcast?

Rocky: The podcast is called Richer Soul. So RICHER and then Soul, SOUL. So it’s kind of the bringing together money and life and how do they fit together.

Giuseppe: Great. And we will include, for everyone listening, we will include that in the show notes. So switching gears a little bit, you had, you know, we had mentioned career transition. So, you know, if you can just talk about that career transition, you know, what are the challenges that people face when transitioning careers, whether it be job to job, or in this case job to business opportunity? And what would be your number one piece of advice?

We Are More Than Our Work

Rocky: So, I think for a lot of people, a lot of people’s identity is tied up in their work. And we are not our work. So I think one of the first things is to, you have to decouple your identity from your work so that you have the ability to explore and figure out what it is that you want to do next. For me, that journey to figure out that what I was going to do next took me seven years. It wasn’t like an overnight switch. Now some people, you know, especially in these times, they don’t get a choice, right? You have to do things quickly. But for me, it was a slow, long process of who do I, who’s the person I want to become?

What do I really want to do for work? And what’s the work that I would do that I loved, that the world wants it and was willing to pay for? And that’s not always an easy concept to figure out. It’s a lot of trial and error and testing. And I think too often, people think they want something until they find out what that really means. And then they’re like, Oh, I didn’t realize it required all of this. And so doing the research, and I know you do that, right? I think you match people up appropriately with who they are and the type of business that they’re going to transition to.

Giuseppe: Yes, yes, absolutely. That’s a big part. We are the, I jokingly say we ask why all the time. And I wrote an article a while back how our kids are always saying why, why why. I tend to do the exact same thing. So we like to dig deep. And when someone comes to me and says I want to open up a sandwich, not to name any brands, franchise, I’ll ask why.

And they don’t really know the reason. They just know that they’re driving by a particular franchise every day. So we ask those difficult questions. We dive deep but more importantly than matching someone with a franchise, we try to figure out Hey, is business ownership and or franchise ownership the right fit for you?

So we like to dig in there and we assist people as much as we can and then we move forward from there depending on if we feel they’re, or if we mutually feel, you know, they’re a good fit for business ownership. So absolutely. And, you know, your number one, what’s your kind of your number one piece of advice for people making that transition? I mean, we talked about, you know, figuring out why you’re doing it. Any other recommendations? Maybe I should rephrase the question.

Rocky: Well, I think yeah, I think you have to have a long runway. It, so I think it really depends. Are you buying an existing business that has current cash flow? If you are, that’s one thing. But if you’re starting from scratch, or you’re building a new business or starting a new franchise, everything takes longer than you think it will. And you will always get knocked around, right? So today, if you’re still like for me, you know, here I am in the middle of building this new business, I’m out networking like crazy, things are going well.

And then all of a sudden, all my stuff in person dries up and now I’ve got to pivot. And so having a long runway and knowing your financials, I think is something that you really need to have clarity around. And hopefully, if you’re lucky, maybe your spouse is working and you can live on one income. And they have health insurance so that takes away that role of it. And part of it is also making sure that your spouse supports you, right?

Doing business is hard. And so having that type of thing, and the other part of business that I don’t think people realize is, you need to be a salesperson. Regardless of what your business is, you have to go out and essentially sell your business. People aren’t just gonna always walk in the door, maybe if it’s a restaurant shop, and you’re in the right location, people will come in, but you’ve also got to sell them as to why they should keep coming back. And so part of being a business owner is sales. And I think the other part of business ownership is, I grew up thinking I had to do everything myself. And that’s so not true.

You’ve got to build a team, have people around you to help you. What are your strengths and weaknesses? We’ll get your weaknesses filled by getting someone to help you and be on your team. And so it’s, I think, too often we don’t realize that we need to have a team and we should build our team and have it in place before we need it because if you go later, you’re gonna struggle at that moment to find somebody. So that’s I think another thing is take the time to plan all these different parts out, or you’re going to struggle later.

Giuseppe: Yes, absolutely. And to your point, sales absolutely. You’re always selling your business. There are a lot of businesses out there, a lot of businesses offering the exact same service. So sales is a key component. And I talk to every single candidate about having the spouse on board as well, having them on the calls because I always make, I jokingly ask the question, when you purchase your home, did you do it on your own or with your spouse? And for the most part, they’ll say with the spouse so, you know, I always say you’re making one of the biggest financial decisions you could make.

You definitely want to have the support of your spouse because there are going to be some ups and downs. You know, the first year is always the toughest year and especially with what’s going on today. So, you know, not all franchises are built the same and that’s a whole nother topic. But you definitely want to have that support. So yes, you basically said a lot of what I tell each and every one of our candidates, so I appreciate that.

Rocky: It’s true. It is.

Giuseppe: It absolutely is. And it’s amazing how many people I will speak with and say Yeah, I spoke with my spouse and I said, Just out of curiosity, what are her thoughts? Why don’t we get her on the phone and then it’s a completely different conversation. They don’t have that comfort level. And typically that fear, that, you know, being uncomfortable, it’s something new and it’s not being informed enough, you know, there’s not that research hasn’t been there.

So, we like to sit down and fill in the blanks, fill in the gaps as to Okay, well, how long will it take? What’s my total investment? You know, we work with the franchise companies, they provide most of that information. So I think just aligning with what they’re looking for, filling in the gaps as far as the information puts a lot of people’s mind at ease. So definitely important there.

Rocky: It does and you’ve got to figure out all those things. And so that’s the thing in business, you have two choices, right? We can learn from our mistakes, or we can learn from others’ mistakes. And there’s tons of information out there. And a lot of what you’re talking about is true. It’s all of the mistakes that most starting business owners make.

And you can either go make them, or you can listen and learn and prevent some of those mistakes by understanding from others. And I yeah, I think just having that spouse and having those conversations. Part of being a business owner is being uncomfortable. So start at the beginning and make sure that you’re actually hearing what the spouse is saying because I think a lot of times we hear but we don’t listen.

Giuseppe: Right. Absolutely. Absolutely. What would you say is the most exciting thing in your world in business right now?

Opportunity Amidst the Chaos

Rocky: So I think the most exciting thing is time freedom. You know, I’ve always had a pretty good balance of time and being able to do what I wanted. And so that’s important. I think the other thing is, what’s kind of going on in the world right now is change. And change, like this brings about so much opportunity.

And I think it creates a whole new space. And if you’re willing to take risks and if you’re willing to step out while everyone else is kind of pulling back, this is one of those times where you can do in a year or two, what in normal times, would take a decade to accomplish. And so I think from that side, I know it’s a very scary time, but I think it’s also a very opportune time. And those people who are willing to step up and lead and go and try things in these times, I think you have tremendous opportunity.

And I think there’s also going to be opportunities to pick up businesses at very cheap prices, you know, in the not too distant future because the people who were running them weren’t taking care of the numbers They didn’t have the ability to go through a dip. And so I think there’s going to be a lot of opportunity. You’ve got to figure out what opportunity works best for you. So I think it’s, in that sense, it’s exciting times.

Giuseppe: Yeah, no, it is. Very, very interesting. But yeah, I cannot agree more. Rocky, so let me ask you this. So a new client reaches out to you. What does that process look like? So if someone listening in wants to reach out, number one, what does the process look like? And number two, what is the best way for someone to reach out to you?

Rocky: So the process is generally, we start with a, just a discussion of who are you, what do you want? Do I have the skills and the ability to help you? So I don’t believe in hard sales. I believe that I want you to be ready to run because I don’t want to pull you up the hill. I want to help you get up the hill. So we usually start with a short phone call to see if we’re a good fit. The way to schedule the phone call is just to email me and I’ll give you a link to my calendar. It’s rocky@profitcomesfirst.com.

And if you go to the website, there’s even a link on the website where you could download two copies of Mike’s, two chapters of Mike’s book. Or just book an appointment with me. And then what the process looks like is in the beginning, I want you to have a clear life vision. So I have all my people create a life plan because if you don’t know what you want and where you’re going, I can’t help you get there.

And you’d be shocked at how many people just don’t have a clear life plan of what they want. So once you’ve got your clear life plan, then we work together over time. So for some people, it’s just one call or one session kind of deep dive, and then they got to go do six months of work. For people who are a little more advanced, than we work together on a monthly basis and I help you achieve your dreams and goals in your business.

Giuseppe: That’s great. And we will include the email, website, all that information on the show notes along with the transcription of the entire show. Rocky, I really enjoyed having you on the show. Is there anything else that you wanted to bring up or tell the audience before we end here?

Rocky: You know, I think the biggest thing is, sometimes doing business is a little scary. Build your team, get your cash in position and then leap and go do it. I mean, no one wants to live a life of regrets, right? You don’t want to spend time 2, 3, 4, 5 years from now looking back and going, Oh, I should have done it. I wish I had done it.

I don’t want to live my life like that. And I think a lot of people unfortunately do. So if you’re not thrilled with where you’re at, take a step. And try little things. You don’t have to jump you know? You can take one little steps towards wherever it is that you want to go. But figure it out and try things out and pivot and see how it goes.

Giuseppe: That’s great. And just that intro call with you would be extremely beneficial just to even get them in the right direction, as you mentioned, to start putting together their life plan. So now that’s great. Some really good advice. Rocky, I wanted to thank you once again for being on the show, and I look forward to speaking again in the very near future.

Rocky: Thank you so much for having me on.