Sharing the biggest gift that’s happened in entrepreneurship in the last 10 years.The step by step guide that you need to build and scale any business you want, any time you want and have a clear, accurate picture of how to do it, where to focus and how to take it to the next level.
As I sit here drinking a gorgeous cup of coffee. I want you to send me a message or leave me a comment. How do you take your coffee? I have this theory that you can tell a lot about somebody by how they drink their coffee and it’s totally made up, but I love thinking about it too.
So just in full disclosure, I want to tell you how I drink my coffee. I drink my coffee the same way every single time and it is a black Americano. I love Americanos. I have no idea why I’ve loved them for a long time. I also love espresso, but I like the ability to take the flavor of that espresso and spread it out over a good half an hour. And enjoy it for a prolonged process.
Every single day my cup of coffee is the same. It is a black Americano with two scoops of Bubs collagen included because I’m all about habit stacking here. And speaking about habits, let’s talk about the habits of building or scaling your business. So as you know, I did an episode, I think it was last week on the five non-negotiable books for leaders. And today we’re going to be featuring another book. But we’re going to be talking about your business hierarchy of needs.
So Mike Michalowicz, which is an absolute genius when it comes to business. The way that he’s able to take complex ideas, break them down and put them into book form, and then literally give you a seat step by steptep guide on how to implement or fix it is mind blowing. And he’s written books called the Pumpkin plan, Profit first. Clockwork which is one of my big favorites. And then his new one, which is now my new favorite book by him and a book I’m going to recommend for the rest of my career is called Fix This Next.
Fix this Next
Now, if you’re familiar with human psychology you have what’s called the Maslow’s hierarchy of needs. And basically what that states is that at the bottom level, if you don’t have access to safety, food, water, and shelter, you can never ascend up that hierarchy into greater things. Growth, enlightenment or anything along those lines. And so Mike took the Maslov hierarchy of needs and made the business hierarchy of needs and talk through every single thing you need in your business, to be able to ascend up to the very tip top of your business.
And the truth is we see a lot of companies all the time that have some thing but they have a big hole missing on the bottom of the pyramid. Or they have a few holes on the pyramid and they start building from the top. They build in the wrong order. They don’t plug the holes. They don’t set themselves up to win. And these are the companies you see that have to raise rounds, arounds or they build it and then it crashes. There are certain things that are required to sustain a business. And the first one is really simple. You need to make sales. Unless you’re a nonprofit and you’re raising money, no matter what your business is predicated on your ability to sell.
So Mike breaks this down in the business hierarchy of needs and the visual is insane. So, two things I would recommend right away. Number one, go buy Fix This Next by Mike Michalowicz, non negotiable. And I actually bought the physical version, the audible version. And I’d go to his website, www.Fixthisnext.com and he will give you a printout.
Just give him your email. He’ll give you a printout and I don’t even know Mike. So if you know Mike, tell Mike I talk about him all the time, please. Actually, what would be amazing if you listened to this, I would absolutely love it, if you bombarded Mike with this episode, like Mike, you don’t know this George Guy, but he talks about you all the time.
Send him this episode because Mike. If you listen to this, when you listen to this, I’m going to future cast right now, and I’m going to speak like it’s happening when you listen to this. I just wanted to say thank you from the bottom of my heart, as an entrepreneur and the hundreds and of thousands of entrepreneurs that you have helped you genuinely solve a giant problem and a big gap in this industry. And so for everybody listening, I recommend all of Mike’s books.
Business Hierarchy of Needs Levels
So in Mike’s book fix this next, he breaks it down into the business hierarchy of needs. And there’s five levels in the business hierarchy of needs.
- Foundational level, the base of your pyramid is sales.
- Second level is profit.
- Third level is order.
- Fourth level is impact.
- Fifth level is legacy.
And we see, or we talk about building a lighthouse. We talk about building a hundred year vision. We talk about building a company that can sustain past your time. And in order to do that, it has to be built from the bottom up so that it can we stand. The pyramids weren’t built from the top down, lighthouses aren’t built from the top down houses. They’re built from the bottom up because the bottom is where the core is and at the core of your business is sale.
So when Mike breaks this down, he talks about all the things that are required for you to do this. Now, I want to be clear with you and what I love about Mike, when he talks through this, it doesn’t mean that you necessarily have to do all of these things in order means these are the things you want to come back and look at because you might hit a point. Where your sales were good, you’re up in the order wrong, but then something in your process changed, you have to come back down and look at the sales, reinforce that foundation before you can ascend back up.
And he’s way more eloquent at breaking this down in his book than I I am. But I’m the sales level all we’re really doing the reason this is the base. Is because without cashflow, you don’t have a business. If you’re not generating revenue, there’s no point in investing in $30,000 website designs or 8 million influencer campaigns, or you know, thousands of units of inventory when, at the core of it, there isn’t creation of cash.
And so what Mike breaks down in this and the five notes I have from this absolutely loved number one in that sales level in the hierarchy of needs. It’s, you’re focusing on the creation of cash, but we talked about the lifestyle congruency. Like how much do you need for your lifestyle because we’re entrepreneurs. You have a monthly nut, you have bills, you have school, you have food. And you need to know what that number is so you can generate it separately. You need to know what that number is. So you can generate that number and sustain your lifestyle, which will allow you to be an entrepreneur. So the first level of sales is number one, lifestyle congruence.
How much do you need for your lifestyle? Number two is prospect attraction. Where are you going to find your potential customers? How are you going to communicate with your potential customers?
Then next level or the next I don’t want to call them levels. The next section of the sales level is client conversion. Once you find all those prospects, how are you going to convert them? Are they converting? Can it be improved? Can the process be improved?
Then the next step is delivering on commitments. You found a prospect, you converted them because you made a promise. Then you have to deliver on the commitments of the promise that you made. And then you can collect on those commitments. I E getting paid on time or clients fulfilling their commitments. And one of the things that I want to note here is you don’t have a business because you sell a service or a product you have to deliver on all of those commitments in order for you to collect.
So the base level of the sales or the business hierarchy of needs is sales. So that’s level one, then level two, we get into profit. And this is where you get to focus on the creation of stability. Focus on the creation of stability. And Mike recommends doing this in five areas.
Number one, debt eradication. You need to be eradicating debt. Not piling on debt right now. There are creative things that you can do. And in this, Mike wrote a book called Profit First, we run all of high-speed daddy by Profit First. My amazing business partner, high-speed daddy, Craig Rizzoli. He’s a mechanical engineer and he’s got that brain, but we run the entire company on profit first. Like the entire company is run based off that book. Our job is to always be eliminating debt. So debt eradication is step one.
Step two is margin health. And, but margin health means is that before you go out and try to scale your business, you need to figure out if you can increase your margins, right? Because scaling something with a small margin, a thousand customers to make a thousand dollars. But if you increase a $10 margin, well now you only need a hundred customers to make a thousand dollars. And so margin health is massive. Now every industry has different margins. But you can figure it out and you want to make sure that you’re setting yourself up to win, especially in the beginning, because in the beginning, if you’re doing a lot of this organic or small paid traffic, and then you start to scale and you have small margins, you won’t be able to effectively scale because you won’t have the cashflow or the margins to be able to pay for that traffic. Because as you go wider or deeper, your ad cost or acquisition costs, most of the time goes up.
So in the profit level, we have debt eradication. Then we have margin health. Then we have transaction frequency. So these are repeat buyers, working on transaction frequencies. You know, we, this longterm nurture, we tell this lengthy customer journeys, like. Transaction frequency. Then you have profitable leverage and I love this profitable leverage is strategic debt. Debt without strategy is just debt, strategic debt. It means, you know that when you use this hundred thousand dollars, it’s going to generate. X not. I’m going to get this a hundred thousand dollars of this $5,000 to $10,000. And I’m going to try,no without a plan you are guaranteed to fail and then you are going to increase debt. And then you’re going to have to go back again to start eradicating that debt again. So strategic debt.
And then the last level of the profit tier is cash reserves. And in the business, that’s a minimum of three months or longer. So the first level of the business hierarchy of needs is the sales level. We went over that. The second level is the profit level.
Now we get into the third level, which is the order level. And in the order level, what your focusing on is organizational efficiency. So you want to be minimizing wasted effort.You want to remove bottlenecks and inefficiencies because at this level you have a consistent sales cycle. And a consistent profit cycle. And so you’ve increased your margins. You have predictable business coming in, and now it’s time to increase the efficiencies with your systems and processes to start replicating yourself and being well to move out of the business. Hiring people in. And so the first thing is you want to as wasted effort, you want to remove bottlenecks and inefficiencies. Then you want to get into role alignment. Our roles matched to the talent, everybody in the company doing their best work. And in this Mike wrote another book called clockwork, which helps people identify what their queen bee role.
In your company you have a queen bee role, but also in the roles of the people, they have a queen bee role. What their sweet spot is to where they’re aligned to the role that’s going to deliver the maximum amount of results. After that you want to get to outcome delegation, the people well close to the problem are they empowered to solve it? And notice how this doesn’t say micromanagement or tasks. It’s delegation. This has outcome delegation. You’re outcomingyou’re delegating the outcome. You’re delegating the ownership to where your not a bottleneck to where they are empowered to solve it with or without you. But primarily without you or without anybody else. And that means they have to be in the right role so they can empower that and they have the support to do that.
Then you get into linchpin redundancy. Is your business designed to operate seamlessly. If key employees are not available? Can you take a four week vacation and just disappear tomorrow? Can you get sick for three days? Can one of your employees go on maternity leave? And if the answer to that is no. Well, you know that you have to have that redundancy. And then the last one is mastery reputation.
So the last level of order is mastery reputation. Are you the best in the industry at what you do? And what I mean by that, if you’re going out and telling everybody how good you are, you aren’t. If everybody else is telling everybody how great you are, you are. And so we covered sales, then profit then order.
And then the fourth level of the business hierarchy of needs is impact. And this is all about client alignment and transformation. So you want to have a transformation orientation. So we talk about this all the time. I say people don’t. You know, when, when transactions, they, when the transformations, people don’t buy the best product or service, they bought the best relationship and you don’t have a business unless everybody has transformed with what you promised. And so you want to be focusing on transformation, orientation, transformation beyond the transaction. Then mission motivation. Is your team motivated by the company mission? Are they excited to come to work? Do they own it like it’s their own? Do they embody it? And if not, how do you get there?
The third one is dream alignment. So is your work aligned with the individual team member’s life dreams? Like, do you know, where are your employees want to be in their life? Are you supporting them in getting there? Do you know what they want? Their financial situation look like their house situation, their family situation, their hobbies situation to look like. When you can get your your business and your team all aligned and you can align your company to support your team members dreams. You’ll be absolutely unstoppable.
The next one feedback integrity. Are you receiving honest, constructive feedback and compliments from team and customers?
And then the last one in the impact phase is a complimentary network. Are you collaborating with other businesses and competitors? Now? This is the entire impact level of the business hierarchy of needs.
And then the last level and the very tip top of the pyramid of the business hierarchy of needs is the legacy level. And your entire job here is to focus on the creation of permanence legacy forever with, or without you.
It’s not a legacy if it’s involves you with legacy. It has to be bigger than you. It has to live on without you.
And so what you’re looking for here is community continuance. Do your clients fervently defend, support, and help the business. Are they more invested in the business than you are because they’ve received such transformations from the previous level that you’ve promised them. Is there intentional leadership turn? Is there a plan for leadership to transition and stay fresh for people to grow for them to escalate up the ladder for them to transition out and put new perspective and fresh purpose perspective in.
The next one, do you have heart-based promoters? Do you have people inside and outside of the organization promoting the company without the need of direction? Now this is a very big one. We cover this when we talk about contagious with Jonah Berger. I don’t know if I’ve done that episode yet, but I’ve recommended a book a lot. To where your job is to show up in such a manner that your results speak for themselves, but also your customers have a clear understanding of what it is you do and how you do it so they can go tell the world about it. And these are your heart based promoters.
The next section is quarterly dynamics. Do you have a clear vision for the future and dynamically adjust quarterly to make that vision come true? And then the last one is ongoing adaptation is the business designed to constantly adapt and improve, including finding better ways to invest in itself.
And those are the five tiers of the business hierarchy of needs with the five. Chapters or containers or sections within those tiers. And so I’m going to cover them again This book by the way, I’ve read this book three times in the last two months and I’ve utilized it on myself quite a few times. And I look at it, add it fresh all the time. I keep this chart just near me on my phone. I can look at it and like, Oh, I need that today making sure that I’m aligned to where we’re going, the impact we want to having the legacy we want to leave. And so in your business, you are the person responsible for the vision. You are the person responsible for looking at this chart. You can be an employee and you’re still responsible for looking at this chart because leadership doesn’t have to happen from the top. Leadership happens everywhere. When we’re intentional about business, we’re guaranteed success because at the intersection, right so you have intentionality, you have disciplined and then you have a vision. If you have the vision and you are intentional about going there and you have the discipline to follow it, you are guaranteed success. The road might not look like you want it to look and it might not be as straight as you think, this is entrepreneurship after all, but you’re guaranteed to get there as long as you utilize this in your business.
So the five levels of the business hierarchy of needs, again are level one is sales, level two is profit. Level three is order, level four is impact and level five is legacy. And I’m going to run through the individual components one more time, really quickly. And then I want you to go pick up Fix this Next by Mike Michalowicz . It’s on audible. It’s also, I recommend getting the hard copy so you can take notes and then go to his website, www.Fixthisnext.com
And yes, I mean this go bombard Mike and let him know how big of an impact in the world, because I’m recording an entire podcast for him on this. I’ve read all of his books. We’ve sold hundreds of them and recommended them all to you. And Mike needs to know Mike. You’re amazing. Thank you for doing your work and thank you for not quitting back in the day after you published that book, and you didn’t get a sale on your first book on the first day. And thanks for sticking it out, brother.
So when we think about the business hierarchy of needs, the sales level, your job is to focus on the creation of cash, lifestyle congruence, prospect, attraction, client conversion, delivering on commitments and collecting on commitments. The next level profit focus on the creation of stability, debt, eradication, margin, health, transaction frequency, profitable, leverage, and cash reserves.
Then order, focus on organizational efficiency, minimize wasted effort, role alignment, outcome delegation, linchpin redundancy, and mastery reputation. Then you get to impact, and your goal is client alignment and transformation. Transformation, orientation, mission motivation, dream alignment, feedback, integrity and a complimentary network.
And then the final level is legacy where you are focusing on the creation of permanence community continuance, intentional leadership churn, heart-based promoters, quarterly dynamics and ongoing adaptation.
And that is the business hierarchy of needs. And so my question for you is when are you going to download it and go look at it and start intentionally plugging these because this is probably one of the best gifts to business I’ve ever seen in the last 10 years. And it’s been transformative in my career. Hundred of my clients lives, my mastermind, students, yours and everything and it is the best representation of what it takes to build and scale a business ethically. Focused on the right reasons, having the impact on the world that we need to have to make a difference. And we’re all responsible for getting it done. So go grab the book, go bombard Mike, and always remember that Relationships Beat Algorithms.