Episode Links

• Get the first two chapters of Profit First for free!
• The Profit Answer Man Podcast
• Richer Soul Podcast
• Follow Rocky Lalvani on Instagram, Twitter, and Facebook

Interview Transcript

Gabrielle

If you’re struggling to make more profit in your business right now, then you are going to absolutely love this interview I have today on the podcast. With me is Rocky Lalvani, who serves as chief profitability officer for small business owners. Now he teaches them how to ensure they get paid and make more profit using the certified profit first method in Mike Michalowicz profit first system. Now that’s where we change the accounting formula of sales minus expenses equals profit to sales, minus profit equals expenses.

I use profit first in my business and I cannot rave about it enough. And Rocky is going to share some amazing tips with you. Now he started with nothing when his parents immigrated to the United States, when he was two years old and his parents were in their 40s. It was his parents’ second time starting over in life as they moved here to experience the American dream. Now, in spite of a lot of struggles and his mom passing away when Rocky was seven, he’s been able to achieve financial and life success.

Now Rocky loves to share his journey and inspire others to achieve their dreams even faster. And all of the topics that we’re talking about in this interview absolutely align with that. So why don’t you give it a listen.

Hey, everybody, welcome to the Well-paid Creative podcast. I am a super excited to bring you a new guest here today. His name is Rocky and he is a certified profit first coach and advisor. I am super excited to talk to him today because I’ve mentioned a few times just randomly in the past that I use profit first in my own business.

And it has definitely been the key one of the key factors of my financial success over the years. And I think that almost all businesses should use it is just such a smart way of managing and looking at your finances. So I’m really excited to dive deep into it, into it here today with Rocky. Thank you so much for joining me.

Rocky

Thank you so much for having me here today. Excited for the conversation. Wonderful.

Gabrielle

OK, so tell me a little bit more about yourself.

How did you get to be a profit first adviser and what did that look like in your career?

Rocky

So it’s actually a long, twisty journey, as is most of life. Right? I was an immigrant to the United States, and so when my parents came here, we had very little and over time they quickly kind of moved up the economic ladder and they would get together with their friends and talk about money and they would talk about how do you survive and thrive in the United States and how do you essentially create the American dream. So as a kid, I was always around conversations around money and I didn’t think anything of it.

And when I became an adult, I’m like always looking around going, why are people struggling with money? Why aren’t there more millionaires? Why isn’t there more success? We’re living in America, the country with so much abundance. And I learned that most people aren’t taught about money. And so then I started to look back at my own schooling and I realized I have a bachelor of science in economics. They didn’t teach me how to build wealth. I have an MBA.

They didn’t teach me how to build wealth. And when you started to read and learn about it, I, I learned that everyone’s got money mindsets in most of our money. Mindsets are created when we’re young and it’s things that you were told as a kid, money doesn’t grow on trees. That’s too expensive. Rich people are evil, right? So if you go around thinking that rich people are evil, what happens when you start to get wealthy?

You go, oh, I’m going to become evil. So I give away my money. Right. You let go of it or you don’t chase it. You know, you go, oh, money, money, bad. So no wonder you struggle with it.

And I think for creatives, they’ve got a lot of money scripts around the work that they do and how it’s tied to money and the values that they put on it. And so I know a lot of them really struggle with that. And then the other thing is and you’ll probably you probably have heard them say it, you know, I’m a creative I don’t do math. You know, I’m a creative. I don’t think about my financials. That’s my accountant’s job, which is fine.

But most accountants. My wife’s an accountant, she’s a CPA. They didn’t teach her how to build wealth. You know, she’s more focused on how do I do the tax return, not how do I increase profits so we don’t even have people around us who are supporting us, helping us to improve profits. So when I read profit first and I went, wait a minute, business owners aren’t looking at their financials. Are you kidding me?

I was like, how do you run a business and not do the business of business? And so I was like, I really should help business owners do this. And so little by little, I kind of took a 180 from what I was doing before, which had nothing to do with this to saying I’m going to go help people survive and thrive. And that’s the way that I prefer to do things. So it’s been a fun journey.

Gabrielle

I love that. And you know what? I loved how you talked about those money mindset issues and especially how it affects us creatives, because there is one thing that I am on a mission to do, and that’s to stamp out the term starving artist, because so many of us believe that, you know, the work that we do and the passions we follow and being creative should be the only worthwhile return from that.

But we need to make money. We need to survive and we need to thrive. And in order to be creative and in order to follow those passions, we need to be safe and secure in our finances.

So I love how profit first just has this focus on getting deep and intimate with your numbers and your finances and not being scared with them and just trying to address those mindset issues that surround it.

Rocky

Well, and the cool thing with profit first is you don’t have to read your financials, and as it is, you know, for most business owners, their financials come sometime much after whatever happened happened. And so it’s kind of like old news.

It’s like looking in the rearview mirror, trying to drive forward with your business. The cool thing about profit first in the way it’s set up is it gives you an instant view of what’s happening in your business and it uses your bad habit, which is to go look at your bank account and go, is your money in there? Is there money in it? It kind of says, OK, that’s your bad habit. Let’s leverage your bad habit and make it work to your advantage.

And so that’s what Profit First basically does.

Gabrielle

Mm hmm. Yeah, right. And I, I still can’t read a profit loss statement.

You know, my accountants give them to me and I’m like, OK, but being able to just do the weekly and monthly actions that come along with profit first. It does. It just kind of keeps you aware of what’s going on and it keeps it front of mind.

So give us a little bit of a rundown about the profit first system and kind of what makes it different.

Rocky

So probably first, for those of you who may have heard, like Dave Ramsey or some of the financial people on the personal side, they talk about giving every dollar a job and some of them suggest, you know, you get your paycheck. In the old days, what they did was they took envelopes and one was labeled rent or mortgage. And you put your rent money in that envelope and you put money in the food envelope and you put money in the utility envelope.

And then you spent out of that envelope. And when the month ended and there was no more money, you, you know, went to the back of the cupboard, find out what’s there, what can I eat this week?

It’s basically the same thing. What Mike did was say, let’s create bank accounts and in each bank account, we’ll give our money a purpose. So the first account is your profit account. Right off the top, you take your profit. So that’s why the new equation is sales minus profit equals expenses, expenses are the left over, not profit. And you put your money in the profit account and of course, you deserve to be paid. So let’s put some money in the pay account and then the government’s looking for its cut.

It’s not your money. So let’s put money in the tax account and then that truly shows you what’s left and what spendable. So when you go to look at your bank account, it’s not this big blob of money. It’s, hey, this is spendable money. Hey, this is my profit. Here’s my pay. I’m getting my paycheck. I you know, I’m not freaking out full of anxiety every month because everything is kind of provided for and we set up the direction up front.

Gabrielle

And, you know, it’s such a revolutionary switch of how we traditionally thought about managing our business money. You know, you pay your expenses, you pay all of that out first and then anything that was left over, that was what you got to keep right. And so when I remember reading that, just that chapter about how profit comes first and that’s what you set aside first and especially paying yourself too because that’s a big deal, especially when you’re a solo partner and you’re just used to taking whatever’s left over, having that set amount of money that goes directly to you.

It’s such a confidence booster and it makes you feel just all warm and fuzzy inside or did for me. Anyway, I was like, I’m doing all of this work now.

I’m actually being compensated for it.

Rocky

And that is very, very true. And and it works and it’s simple and it takes all the emotion out of it. And, you know, you just have to kind of do it. Do you find it hard to implement and to do the the however you do your rhythms or is it pretty simple?

Gabrielle

You know, and essentially the way it’s set up in the book is pretty.

It’s not a complex system or a method of working with your finances, but there are some parts that you can kind of tweak and adjust to make your own. So what I’ve done in my business is that I have the four accounts and I have my percentages of every dollar that comes in. You know, a certain percentage goes to each of the four. And then I just a lot that money every single Friday, Friday is like my money day. So I go in and I say, OK, well, this much is in my income account.

So, you know, that percentage goes to my operating expenses as per cent goes to my profit. And then that’s just what I do every week.

Rocky

OK, and it works, right? It’s simple. It works and you don’t have to fuss. Just out of curiosity, have you ever upped your pay and your profit accounts? The percentages I have, I’ve done it twice. And that would that felt so good. So one of the concepts and profit for is that you assign percentages of every dollar to each of those accounts and the. Is that you start off with, you know, what’s actually going to work right now and then with the knowledge that you would eventually move to an ideal percentage?

So I think he calls it caps and taps.

Rocky

Yeah, current account allocations. And then but the target account and target.

Gabrielle

So what I’ve done in my accounts is actually they’re all labeled with the caps and the taps. So like this is what it is currently and this is what I want it to be. So I could actually kind of see that reminder of, like, this is what I’m moving towards and I’ve adjusted it twice.

And oh man, does that ever feel good

Rocky

And that’s a big part of it is is little by little you make changes, you know, baby steps add up over time. And that’s kind of the key here is to constantly make those small, small changes and to be a little bit faster. And then the other thing is to go through your bank statements and look at all your spending and ask yourself, am I getting value for this? So often we sign up for stuff in it, auto renews and we forget we’re even paying for it.

So it’s more about cutting the costs in your business and just taking the time to be intentional on your spending. And unfortunately, you know, nobody talks about that. Everyone just talks about spend, spend, spend. Nobody talks about save, save, save. It’s not a message. It’s not a message that that gets out because nobody’s paid.

When you save when you know, other people get rich, then you know that they’re all about you spending. But you getting rich is not on everyone’s agenda. And it should be on yours because.

Gabrielle

Yeah, it should be your number one priority for sure. Yes.

And then, you know, as you talked about, I think a lot of times we struggle and we have fear and anxiety. And I know people whose as their business has grown dramatically. The nice thing about profit first is it keeps up with the growth of the business. So when tax time comes and you get that surprise tax bill, they’re like, it’s OK. I had the money saved so many other days. And so tax time is no longer is.

Gabrielle

Tax time gave me so much stress because it was a big question mark. I wasn’t exactly sure how much I was supposed to pay. I had kind of a basic idea. But I mean, corporate accounting and taxes in Canada always kind of astounded me. But so my accountant would just send me the statement and say, this is what you owe this year, and I would probably have a mini panic attack and go, how and where does this money come from?

So I would spend the next two months trying to earn enough money in order to pay my tax bill. But the very first year that I implemented, profit first that tax bill came and I said, oh, OK, I’ll just pay it. More than enough in that account.

Rocky

And I’ve got one story that I share on the podcast where that tax bill was almost one hundred thousand dollars and the guy said exactly what you said.

He goes, OK, I’ll drop off checks. Yeah.

He’s like, I had more money in my tax account than I needed in. And that is the power of it, you know, and not to match it. So now do you take the quarterly profit distributions? I do, yeah. So what do you do with your profit distributions? Sorry, my sorry kicked in for some reason, he’s always interrupting. Can you repeat that question?

What do you do with your profit distributions?

Gabrielle

So generally what I do is it goes right into my personal account and then I usually spend it on something for the business technically.

Rocky

OK

Gabrielle

So it’s always something like because I’m a big tech head or creative. So I love playing with new software. I love playing with new, you know, toys and stuff like that. So usually I’ll spend it on something like that. My last profit payout, I bought myself the new remarkable tablet.

And it’s a pretty penny. It could have technically been a business expense, but I knew it wasn’t an actual business expense because, you know, we do want to make sure that our expenses are kind of pared down and realistic. Right. So that’s usually what I spend my profit payouts on.

Rocky

And that’s cool. Everyone gets to decide how they how they spend their profits and they get to splurge a little and celebrate. You work hard in your business. You deserve the rewards of that. And that’s the cool thing, is here you go. Every quarter you get an allocation and you get to go splurge and you get to be rewarded for your business instead of struggling in your business all the time. And that’s the key. So that’s that’s very powerful for people, is that ability.

And then for those people who are in debt, it gives them a way to pay down their debt quickly and get them out,

Gabrielle

And that’s what I did for the first couple of years when I was using it, because I was still struggling with quite a bit of business debt. And so that was just an extra chunk of money that just went straight onto my debt with no worries.

This has been an absolutely amazing interview and I don’t want to take you away from it, but I just wanted to let you know that I have a brand new guide that I think you’re going to get a lot from. It’s called the Three Pivot’s for Creating and Selling Profitable Packages. And I know it’s going to be right up your alley. So if that feels like something that you want to work on, go to wellpaidcreative.com/pivot and grab your copy completely free today.

Rocky

It sounds like the system is taking all your worries away and make sure I I’m literally the poster child for profit.

Gabrielle

But it’s what I love is that it can work for any size of business right now. It’s really well, the smaller your business is.

Rocky

It does. And so I think for a lot of people they’re like, oh, I’m just starting out. And we tell people profit is a habit, it’s not an event. So even if you’re starting out, I have someone who started in 2020 new business and Paul took out his quarterly profit checks because his new business was designed to be profitable and he implemented the system and it works. And so that’s kind of the cool thing. Yeah. And it doesn’t matter what size business you are.

the system works regardless of that, and so from that standpoint, it’s been really cool and I heard you taught your financial person how to use it and that they started.

Gabrielle

Actually, that’s a funny story.

So when I first found profit, first I read the book, fell in love with it, started implementing it into my business finances. And then right around that same time, I started working with a financial advisor. And so I brought it to him and I said, OK, this is what I’m doing. I’m really excited about it. And here’s the book and you can check it out because I think you’d be really interested in it as well.

And he read the book as well. I just as much in love with it as I was and actually started down the path of becoming a certified profit first adviser or certified professional or something. I can’t remember what exactly they called them, but yeah. So he’s actually just finishing up the process of becoming certified and using it in his own financial company and teaching it with all of his clients too. So I think that was really cool.

Rocky

It’s you know, it’s funny. I always laugh when the accountants learn it and then they start using it for their clients because they had success, which shows you that a lot of times, you know, your accountant didn’t know how to build wealth. And then once they start using the system, they go, oh, my God, we’re building wealth. I got to tell everyone.

And it happens all the time. So it’s definitely it’s definitely been a massive positive for people in it. It takes all the stress away, which is cool. Mm hmm. The other thing we should go ahead.

Gabrielle

I was going to say, so what steps would you recommend to someone who is just starting out thinking about doing this profit first, probably already running their business finances. Who knows how? What would you suggest that they do if they want to start implementing this?

Rocky

So you can set up your your five accounts and you can go full bore in? I find a lot of people struggle with that. I can’t tell you how many times, Mike has come off the stage and people come up and go, I love your book. I love your talk. I’ve read it twice. In the first question he asks is, did you open your accounts? And the answer is invariably no.

So what we tell people is, let me give you a taste in a simple way. Create one account, label it profit. And once a month, just go in and look at how much you made that month and put one percent into your profit account. You will not miss a dollar out of one hundred. You just won’t. And then at the end of a few months, look at your profit account and see how much money you have, and hopefully that will inspire you to take it to two percent and then give it a couple of months and see how much money you have.

And right now, you’re starting to implement profit first. You’re starting to see the power and then, you know, just rip the Band-Aid off and go full bore and open up your accounts and start start your allocations with where you’re at today and little by little start to up them.

And I think it’s just once you start to get more comfortable with your money and you start to see that this is really easy, it’s not scary. It’s you know, you’ll just start to roll with it.

Gabrielle

And yeah, when I first started, my profit was only two percent and it was just such a tiny amount, but it was an amount. Yeah.

Rocky

And most people do that. They start very small. But over time, if you take baby steps, you can get to some pretty high profit levels really fast. I had one customer who last year like we started working together. He had a pretty decent profit margin to start with, although he wasn’t keeping it. He was always spending it within no time. We got him up into the 30s like, oh, wow.

Yeah, he was he really cut his spending. He turned off his shiny objects and said, you know what, I really need to buckle down. And so he’s able to see his bank balances grow dramatically over time. And it’s. Every business is slightly different, but it works and every single business and you just have to take time to do it. One of the things I was going to mention is value pricing. And so I think a lot of times what profit first will also help you do is to think about how you’re pricing your products and evaluating your time and the return you’re getting on it.

So it may help to show you that certain things you do are more valuable in the marketplace. And if you can spend an hour and in one place you earn ten dollars, but in another activity you earn one hundred dollars. Well, it seems smart to start doing a lot more of the hundred dollar activity, right? Mm hmm.

And upping your game and not being afraid to charge. What the value you deliver is too often we do time and materials, and that’s really not the best way to do things. It’s to say how much value did I give my client? And based on that, I’m going to charge appropriately and I’m going to charge more than I charge now when I look back.

Gabrielle

Yeah. And seeing the money coming in and giving it essentially a purpose like the envelope, but not being so specific about it. And I think that was a little bit freeing for me too, because having an envelope marked rent or software or hosting or whatever heck expense category I had in my business almost seemed so restricting. But having a little bit of a broader category saying this is all of your expenses and this is all of the money you have for your expenses.

And it’s up to you to decide where that’s going. It gives you a little bit more freedom and it’s not quite locking you into giant spreadsheets and huge budgets that just, I think, creatives just really rail against that. It just kind of bristles against us.

Rocky

And you don’t have a budget and you don’t have a spreadsheet do you?

Gabrielle

Nope I just keep track.

Rocky

Yeah. So you don’t have to worry about these things. That’s why it’s so perfect for the creatives, because I know how you all think and this works with the way you think. It leverages your we’ll call them bad habits of not looking at your financials, but it leverages your bad habits to your advantage.

So that’s really, really cool.

Gabrielle

Oh, I love that. Oh, this is such a good conversation. And I know that we could probably go on for hours and hours, but I love asking everybody this one question on the podcast. So what do you do? Do you have any hobbies or activities that you do in your spare time that you do just for yourself?

Rocky

So I’m trying to figure that one out. My my last kid just started college this fall. And before that, all I did was. All of their activities, so I didn’t really have very much of a, you know, a life, I think, you know, I would say one of the things that I do, it’s fun. It’s kind of for work, but it’s not really is my one podcast, which is about creating the ultimate life.

And it’s fun because I get to meet people that I would never otherwise get to meet and they’ll give me an hour of their time and they’ll they’ll teach me what’s going on. So that’s really fun. And I think the other thing is I as you can tell, I love to read. And so for me, that’s a big part of it. Like, I probably there’s months where I’m reading six or seven bucks a month.

Gabrielle

I noticed some of my favorites in there behind you.

Rocky

Yeah, I’ll usually read at least two to three books a month, but every time I turn around, four more books are added to the list. So I, I do my best to crank through them. That’s been a lot.

Gabrielle

That’s one of those pursuits that even if you never accomplish it all, still worth going.

Rocky

Oh yeah. I well it’s funny because every book takes you to the next level and then it opens up a new door that takes you to the next level, which opens up a new door. So they kind of build on each other. It’s it’s kind of like climbing a ladder. You can’t go from the first rung to the tenth rung. You know, if you try and jump like that, you’ll fall off and hurt yourself. But if you climb up slowly, rung by rung, it works.

And that kind of books do you know, you have to you have to figure out each level and little by little you’ll get there.

But there’s no there’s no end.

Gabrielle

Wonderful. And what’s the name of your podcast?

So I have two if you want to learn more about how do you implement profit first and the steps and all of that, that podcast is called Profit Answer Man. In all we do is talk about profit first and then my other podcast is called Richer Soul. So Richer Soul is, hey, you figured out your money. Now let’s figure out the rest of your life. How do you create harmony in your life with all of the different areas?

How do you build relationships? How do you connect spiritually? How do you get health and in wealth, and how do you manage your time, so how do you create the ultimate life is basically the key there?

Gabrielle

Oh, that sounds interesting.

Well, you’ve got a new listener in me, and we’re going to link both those podcasts down below in the show notes for everybody else to check out. And we’re going to also include all of Rocky’s information so you can go find him and follow him and give him all the attention he deserves. Thank you so much, Rocky. This has been an amazing conversation. I’m really happy that you took the time to join me here. Thanks.

Rocky

Thank you so much for having me. It was a pleasure to get to know you better and to chat with you.