July 22, 2024 • 31 mins
Rocky Lalvani, a renowned Chief Profitability Advisor, is dedicated to helping businesses maximize their profits. Balancing his expertise in corporate finance with the insights gained from parenthood, Rocky brings a unique perspective to empowering entrepreneurs. He has successfully transformed numerous businesses with his expert guidance. Join us to uncover Rocky's top strategies for achieving financial freedom and building a successful enterprise. This is a rare opportunity to learn from a true leader in the field!
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Episode Transcript
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Speaker 1 (00:00):
I am a dad.
My kids are older now in thatthey've graduated college and
are out getting started in life,but we've been through that
whole journey, spending timewith them and helping to raise
them and do all of that, andalso to have them as part of the
business and having them, evenup to this day, helping us in
(00:23):
the businesses as well.
So finding that harmony betweenit all and figuring out how to
make it work for you.
Speaker 2 (00:33):
So how did you start your entrepreneur journey?
What motivated you to createthis business?
And try to help specificallythe business owners.
Speaker 1 (00:44):
So this has been a long time in the coming.
I was very entrepreneurial as akid and then I ended up getting
a job and the job was good, soI stayed there a long time, but
it wasn't what I loved, and sothis kind of was more to say
what is it that I want to do onmy terms, the way that I want to
do it, and how do I figure outhow to do that in a way that I
(01:10):
can also build a client basethat would make it worthwhile to
do the business and to walkaway from W-2?
Throughout that time, we'vealways had side businesses.
So even when I was working fulltime, we had side businesses,
we had real estate, always doinga variety of different things,
(01:31):
and I think this was the finalwalk away and just be 100% on my
own choice that I finally made.
But it took a lot of planning,testing and figuring it out
before making that leap.
Speaker 2 (01:54):
That is interesting.
Why, specifically the smallbusiness owner?
What motivated you to createthis business, specifically
helping the small businessowners?
Speaker 1 (02:04):
So I actually started out on the personal finance
side in helping people to buildwealth, because I looked around.
I'm like I don't understand whythere aren't more wealthy
people, and so I was doing that.
But what I found was it wasvery hard to market to them and
also to get people who wanted toactually build wealth slowly.
(02:28):
It's really easy to sell peopleon building wealth fast, but
nobody actually wants to takethe time to do it right, and so
there was a market mismatchthere.
And while I was trying tofigure that out, I came across
this concept that businessowners weren't looking at their
financials.
(02:48):
And I'm like, wait a minute,that makes no sense.
How do you own a business, runa business and have no idea what
your financials are doing?
I mean, that's a principalthing of being a business owner.
And I started to realize thatwait a minute.
Business owners went intobusiness to do what they loved,
(03:09):
and most of them don't love thefinances or the accounting.
They're not looking at thenumbers at all.
And I was like, wait a minute,this is now kind of that market
segment where the skills I haveand the value I bring are badly
needed, and if I can make apivot from personal finance to
(03:33):
business finance.
Then I have the ability tobuild a market, and as part of
that, I read the Profit Firstbook, which was really
enlightening Not so much for howProfit First works, because
I've been doing Profit First mywhole life.
I understand the principles ofit.
What amazed me was that businessowners were struggling so much
with this, and so I tookprobably another year or two of
(03:57):
testing the market, trying tofigure it out, and say is this
really true, will this work andcan I build a business around it
, and is it valued?
And I came to learn that it was.
And now that I've built mybusiness, it's like oh yeah,
this is normal.
It's no longer like I can'tbelieve it.
It's like this is the norm.
(04:18):
People aren't looking at theirnumbers, and if you can help a
business owner to be successful,they don't have a problem
investing and being able to dothat as well.
Speaker 2 (04:32):
That's interesting.
Let's a little bit dig intoProfit First book and what
motivated you.
What are the key points thatyou think are the most common
mistake business owners do?
Speaker 1 (04:45):
So, first of all, there's a couple of things that
they get wrong.
A lot of business owners focuson top line revenue and they
think, oh, if I just sell more,I'll be able to keep more.
What they don't understand istheir expenses are keeping up
with their revenue, if notexceeding it.
So for a lot of business owners, the amount of money left at
(05:06):
the end of the day for them isvery little.
And too often we're told youhave to spend money to make
money, or they hit a hiccup intheir business and they don't
have cash reserves or somethingalong that line happens.
Profit first goes by a simpleequation of sales minus profit
(05:26):
equals expenses, which means youput profit first.
You actually take your profitthe moment you make your sale.
Now it doesn't mean you don'tpay your bills, it means you
constrain your spending, whichis the same principles of
personal finance, right,everyone?
It doesn't matter how much youmake, it matters how much you
(05:47):
save or keep, and so that waspretty much the same principles.
And then I think the secondthing is setting goals, so
setting financial goals for thebusiness and then measuring
against those targets on aregular basis.
I've always done that inpersonal finance, and yet I was
shocked to see most businessowners weren't doing it in
(06:09):
business finance, and so thoseare probably two of the main
things is setting the goals,tracking against them and making
sure that you're actuallypulling your savings, your
profit, first, and making surethat you're getting paid before
you start spending money oneverything else.
Speaker 2 (06:31):
How can anybody do that?
Rocky, can you help us?
Because I think the main sethow the brain works is you get a
little bit of money and thenyou go into this loop of buying
a house, buying a car, take themortgage and so on.
If I'm looking at because it'sa parent entrepreneur podcast,
(06:51):
if I'm looking at a parent whois doing a corporate
nine-to-five job and he wants toactually implement the formula
of profit first, what are thethings they need to consider?
Speaker 1 (07:04):
Profit first.
What are the things they needto consider?
So, first off, if you're in aW-2 job, think about your 401k.
That is the perfect example ofprofit.
First, you put money in your401k before you get paid.
You don't miss it, you don'tnotice.
It's even gone.
And if you increase it slightlyover time?
(07:24):
So let's just say, for example,at the beginning of this year
you're putting in 4%.
Well, what happens if everythree or six months you up it by
1%?
So you go from four to five,then you go from five to six,
six to seven.
Over a period of time, you'llnever miss those small changes
(07:49):
and before you know it, you canbe saving 12%, 15%, 18%.
Now the problem with that isit's all in retirement.
So if you want to start abusiness, it's hard to tap into
your retirement money withoutpaying a ton of taxes.
So then you start a second bankaccount.
So then you start a second bankaccount and every time you get
paid, put a small percentage ofthat pay into a separate bank
(08:10):
account and let it grow.
That will become your seedfunding for your new business
and give you the cash flow toget started and get moving over
time.
And it's the same thing.
Whatever money ends up in yourbank account, I don't care how
much you make, it all disappears.
So if you constrain yourself,you will just naturally not
(08:37):
spend as much.
Because there's no money there,so you don't spend it.
Speaker 2 (08:45):
Hmm, that's an interesting point.
How about if we go and tap intodifferent age groups and maybe
we can go through that part ofit?
If I have a teenager, I thinkyou're a father of teenage kids
who have now grown up.
So if I have a teenager and hewants, or he or she wants, to
(09:10):
have profit first on their firstjob or their volunteer or their
you know, the part-time job,what they're making money off,
how can we train the teenagersto have the profit first mindset
?
Speaker 1 (09:25):
This is the number one mistake of parenting.
Okay, you're trying to changeteenagers.
You failed.
All right, I taught my kidsprofit first when they were five
years old.
When they were five years old,we gave them an allowance.
It was equal to their age, sothey got $5.
Now we didn't have bankaccounts, we had envelopes.
(09:45):
$5.
Now we didn't have bankaccounts, we had envelopes.
Same concept.
So when they would get their $5of allowance, they would take
their $5 and $1 went to charity,$2 went to savings and $2 they
could spend on anything theywanted.
And so we were just building ahabit of them having money.
(10:05):
We were building a habit ofthem saving money because we
told they said well, what are wegoing to do with this money
that we're saving?
We're like well, you can usethat money to maybe buy a house
or do something.
So far in the future you can'teven imagine it.
Now, this is the surprisingthing.
You know what happens?
After 52 weeks of putting $2aside, you have a stack of over
(10:32):
$100.
That becomes a pretty thickstack of bills and over time the
kids start to watch this grow.
Now, as they get older, you canopen up a bank account, move
the money from the envelope tothe bank account, move the money
from the bank account to abrokerage account and start
teaching them how to invest.
But even when they got birthdaymoney, it's the same concept.
(10:54):
Take your gift.
Part of it goes to savings,part of it you can give to
charity and part of it you cansave Now, or part of it you can
spend Over time.
You have to teach them how tospend money appropriately.
You have to teach them aboutcommercials.
You have to teach them aboutconsumerism.
(11:15):
You have to teach them hey, ifyou save up for a few weeks,
then you can buy somethinglarger.
You have to teach them that.
Hey, if you buy a candy bar atthe gas station, it costs $2.
If we go buy that same candybar at the grocery store, maybe
it's only a dollar.
And hey, if we go to Costco,you can get that same candy bar
(11:37):
for 50 cents, but you're goingto have to buy $10 worth right,
because it comes in a largepackage.
Then they start to understandthe principles of how this all
happens.
The next thing you do is thenext time you go to the grocery
store and they want a candy bar,you go, you have your own money
.
Buy it and you will be shockedhow quickly kids will learn how
(12:01):
not to spend their money,because I guarantee you they
will spend your money withouteven thinking twice.
Speaker 2 (12:13):
Spending parents' money, even thinking twice.
Okay, that's a strong one, butI think that gives a reality
check on how to train the kidsto value the money and to think
about the future the principleof profit first.
Again, there is one curiousfact I learned about you but
correct me if I'm wrong is thatyou already have a podcast
(12:36):
called Richer Soul, where you'retrying to help other people
with your tips.
Is it true?
Speaker 1 (12:42):
Yes, I do have another podcast podcast and that
was the original podcast.
So that was teaching people howto build wealth and how to do
that, and but we weren'tteaching what everyone else was
teaching.
So we were teaching a lot ofthese principles, but we were
also teaching it to high incomeearners.
(13:02):
So it was like, hey, if you'rejust going to chase the money,
you're not going to be happy.
It's more than just chasingmoney.
So we talked about all of thedifferent things about how to
live life on that podcast and Istill have it, we still record,
we still do all of that, butthere's no business behind it.
Um, but it's fun and it'senjoyable behind it.
(13:23):
But it's fun and it's enjoyable.
I meet the great people and Iget to give back.
Yeah, that sounds really greatand actually I did an episode
with my daughter.
So that's one.
Yeah, I think it's number 72.
Speaker 2 (13:51):
And we talk about how to raise kids and what we did
with our kids, which was vastlydifferent than what most people
do.
Oh, I will definitely hear thatone for sure.
So, rocky, let's hop into yourjourney.
As a parent, I know you alittle bit touched base about
your belief in profit firstprinciple and how you taught
your kids around it, and youworked in some years in
(14:12):
corporate America while you'reraising your kids, and then you
have your business and youstarted entrepreneurship journey
.
Tell us what went into yourmind when you really wanted to
make in a full-fledgedentrepreneurship journey and
what kind of discussions thatyou guys had as a family and as
(14:35):
kids, why it's hard or why it'schallenging, especially for
parents, to go intoentrepreneurship journey.
What you thought from yourjourney was most challenging.
Speaker 1 (14:47):
So I think the startup phase is difficult
unless you have clients to walkout with, because you have to go
out, you have to build abusiness and that takes time and
effort.
That said, I did this so that Iwould have time freedom and
financial freedom.
I make a lot more than I didwhen I was in corporate.
(15:11):
I spend more time now, probablythan I did when I was in
corporate, but that's by choiceand it's also because the kids
are gone.
If I had to figure out how tocreate the time balance, I would
create the time balance.
I think, more often than not,we waste a lot of time, just
(15:35):
like we waste a lot of money,and I think that's the biggest
thing with parents.
They're signing their kids upfor all this stupid stuff that
is not going to get them intoanything, and we actually talk
about that on my podcast, likewhat is important when it comes
to looking at college?
How do you make it faster andeasier?
(15:56):
How do you not play the gamethat everybody else is playing?
And how do you create the timeto be home with your kids?
How do you create the habitsand the stacks to be able to
have more time freedom with themand to be more involved as they
are growing up.
I coached a lot of their sports.
(16:16):
The advantage of coaching theirsports is guess who gets to
pick when we practice?
I do it goes on my schedule,not somebody else's, and I'm not
running around to 20 differentplaces.
If my son and my daughter bothhad soccer practice, I'd call
the other coach.
We'd work together and we'd beside by side.
The girls would be over there,the boys would be on the other
(16:38):
side.
We do the same night, so thatI'm not killing myself for
somebody else's craziness.
Speaker 2 (16:46):
I think that is a very smart and strategic
approach that most of the peopledon't think, and personally I
see a trend about people go in aherd and follow that somebody
else is following, rather thanstanding or sitting for a minute
, think what is my kid doing?
(17:07):
What are they really good at?
Where do they want to go, andis this class or is this effort
that we are putting in reallygoing to give them value in the
college?
Right?
Each kid is unique in their ownkind.
Each kid have their own skillsand each kid have their own path
(17:28):
to go to.
So the formula that might haveworked for one kid might not
work for the other kid, and it'squite surprising that not most
of the parents think that way.
Would the same thing apply for?
Profit first, too?
Means, for example, there aredifferent kind of families with
(17:50):
different lifestyles, right,different economic styles.
So if we go, if we can startwith middle class family and
higher middle class or richerfamily, I think for every kind
of economical backdrop, profitfirst is their top priority.
(18:12):
It doesn't matter what classthey are in.
Do you agree or disagree?
Speaker 1 (18:16):
Yeah, it doesn't matter how much money you make,
this always works.
Yes, so if we.
Speaker 2 (18:22):
yeah, if you look at the middle class family, or if
there is a family of two kidsand they are school going, kids
in elementary or middle schooland what the parents are doing
corporate America are incorporate America.
What are the things they needto consider?
(18:43):
And start the value of profitfirst lifestyle.
Speaker 1 (18:49):
I think first of all, you have to teach your kids the
value of money and you have togamify it and you, you have to
understand that it's not yourjob to be their bank and just
hand the money whenever theywant it.
Um, that's a big part of it,and so I think if the kids are
involved in family planning,they start to understand what is
(19:12):
involved in having to buy allthe things that they think that
they need, from cell phones tofancy clothes, to all of that.
But you've got to model it forthem so you can't say you can't
have this while you go do it,because they know when you're a
hypocrite and they'll call youout in a heartbeat for being a
(19:32):
hypocrite.
So I think it's learning tomodel it and decide what's
important.
Like I see these parents,they're spending thousands upon
thousands of dollars for sports.
None of these kids are going tomake it to the major leagues,
or if they do, it's like I don'teven know the astronomical odds
(19:56):
.
Might they get some money forcollege Maybe, but most college
sports don't pay that much money.
I think parents spend more onsports than the college will
ever give them.
And then the other question isis college, even the right
choice, and how do you determinethe value of college?
(20:20):
A lot of these colleges areridiculous $300,000 for a
useless undergrad degree.
I would never pay that.
My kids know it.
They're like I said I don'tcare if you get into Harvard,
we're not going because I'm notpaying that ridiculous bill for
what little they teach.
You got to figure out how youcan get through these processes
(20:41):
faster, quicker, easier.
And you got to figure out thegame that's actually being
played, because there is amassive game being played around
you.
And you got to figure out thegame that's actually being
played because there is amassive game being played around
you.
And if you don't realize that,you're just going to hand your
money to whatever Ivy Leagueschool or whatever school that
your kid thinks they should goto.
My son, both my kids, graduatedcollege early.
(21:02):
My son graduated college at 20with an engineering degree.
We got through in a fraction ofwhat everybody else was paying.
We figured out the scholarshipsystem.
We figured out the merit system.
We picked our colleges based onvalue.
We figured out how to go inwith a ton of credits at very
low cost, and there's so manynew online programs, so many
(21:26):
other programs coming up todaythat you've got more flexibility
than you've ever had to getthrough school, and it's only if
you need an advanced degree.
Then you can see about going toa fancier college at that point
, but for undergrad it's prettymuch useless, I think that is a
(21:50):
very interesting fact.
Speaker 2 (21:52):
I have never heard anybody say no they're not going
to yeah, no, and that's I thinkit's very, very honest uh,
feedback, and I really reallythink the listeners will hear
and understand this concept.
Um, because it's like a ratrace and people just you know,
(22:13):
somebody said it, it's a goodone and they just go blindly
right without the planning of it.
Um, let's talk about.
You talked about the value ofteaching the curse of profit
first and knowing the value,knowing what it takes to buy the
awesome things that you want,but also at what cost that
(22:37):
you're sacrificing for others.
What other things we, asparents, should teach the kids
on the work-life balance orenjoying the profit first
principles, but also enjoyinglife at the same time.
What are the principles thekids have to learn?
Speaker 1 (22:58):
Well, first of all, I think they need to under.
Most kids have no idea how muchpeople get paid, right, they
have no idea how much life costs.
So if you're not sharing withthem, or at least teaching them,
hey, if you're looking at theseprofessions, how much does it
cost to go to school?
What is that person going tomake?
(23:19):
Are you happy with thatlifestyle that that salary
affords you?
Is that the kind of work youeven want to do?
People go to all these careerpaths never examining what it
actually means to do that work,and you should have your
teenagers go talk to people inthese different fields and have
(23:43):
conversations to understand whatdoes it mean to work in this
particular field, or is thisparticular job and what are the
income potentials and what is?
How long does it take to getthere?
And is that a sacrifice you'rewilling to make or not make?
Nobody's having theseconversations right.
(24:04):
They just tell you go to school, get a four-year degree,
everything will be OK andeveryone's starting to wake up
in their late twenties now goingwait a minute, that was a lie
and I think kids need to go outand see.
Some kids are.
They might do bad.
I mean, an auto mechanic todaycan make six figures right.
(24:24):
An electrician or a plumberdoesn't have to worry about AI,
doesn't have to worry abouttheir job going to China, right,
and they can make a very goodliving and they can turn it into
a business and they can have avery nice lifestyle doing what
they like, because some kidslike working with their hands
(24:47):
and yet we tell them they can'tor they shouldn't, or this or
that.
So I think it comes back tounderstanding who your kids are,
what they want, and then givingthem exposure.
So I will give a hands out.
I think one of the best programsout there for exposure is the
Boy Scouts.
The Boy Scouts have so manydifferent merit badges in so
(25:09):
many different areas.
They can learn aboutelectricity, they can learn
about welding.
They can learn aboutelectricity.
They can learn about welding.
They can learn about sales.
They can learn about robotics.
They get exposure to adults whoare willing to come talk to
them and they get to start tosee, hey, you've got to teach
your kids how to ask questionsof different people to find out
(25:32):
what is important to you.
And if you hear my daughter'sepisode, you'll see at 16, 15,
she was talking to women whowere in their late 20s.
What were your regrets?
What do you wish you had knownat my age?
What would you do differently?
And that's where she started tosee what other people had
(25:55):
learned.
So she didn't have to maketheir mistakes.
And it wasn't me, the parent,telling her, cause they're not
going to listen to me, but bygiving them the opportunity to
go have these conversations,they are going to learn.
They're going to see it frompeers or from people they might
respect.
And when they start to hear thesame thing from multiple people
(26:16):
, then they start to go, oh okay, and then you can have
conversations with them.
Speaker 2 (26:23):
Makes sense.
How can you and your institutehelp parents to build a profit
first?
Speaker 1 (26:34):
help parents to build a profit first.
Well, so I think everythingthat we we don't have any formal
programs for teaching parents,but throughout the podcast
there's a whole bunch of freeinformation that we share on how
to do a lot of these differentthings, and you just got to find
those episodes and listen inand see what it's different.
(26:58):
But I think the biggest thingis to have an open mind of not
following the herd, because ifyou want to follow the herd,
have fun.
And I'll be honest, when I wasa parent, here's the biggest
struggle I had Do I want toteach these people how to do it
the way we're doing it, or do Ijust want to shut up?
(27:19):
Because you know how mucheasier life is going to be for
my kids if they're all going thewrong direction.
Right, the competition becomesslim to none.
And actually and it's been awhile since I've looked at this,
because my kids are out of highschool Even the NEA is the
National Education Associationthey came out with I think it's
(27:40):
called the four C's.
They're like these are theskills we need to teach our kids
, and then they come out and saywe don't know how to do it.
I'm like I do.
This is how you teach this.
Our kids went to a classicaleducation school, and classical
education is how they used toteach people before the current
(28:02):
school system came into place.
They teach your kids how tothink, how to speak, how to
write persuasively, how to makea point, how to understand the
psychology of how humans makedecisions Okay, and using logic,
(28:24):
and all of these differentthings that we don't teach kids
anymore.
We don't teach them how tothink, we teach them what to
think, and so you have a bunchof sheep running around.
Speaker 2 (28:37):
Yeah, so true, so true.
How can your organization helpsmall business owners around the
world?
Speaker 1 (28:46):
So we do work with small business owners.
We sit in the financial seatfor them.
We help them to figure out whatare their goals for the year,
how their goals fit in withtheir personal desires in their
family life, and how does thebusiness serve you instead of
(29:07):
you serving the business.
At the end of the day, ifyou're going into business to
make more money and have morefreedom, then your business is
supposed to serve you.
Most business owners become aslave to the business.
That's not the way it'ssupposed to be.
So we help them to understandtheir business, to reverse
(29:28):
engineer it to work for them,and then to set targets and
figure out how to make it allwork in a way that works for
them.
I tell my business owners I'mlike you need to take vacation,
you need to do this, you need todo that, and I'll show you how
to make your business pay for itall.
That's what we do.
Speaker 2 (29:47):
And that I think, is very unique compared to what
other people in your industryare trying to sell.
It's working smartly andstrategically and working
towards what works for you best,but also having the profit
first, rather than going intothe cheap world as most of the
(30:07):
other services do right, usingthe old formula that most of the
sheep follow, and I think thatmakes you and your business very
unique compared to others.
So, rocky Lawai, thank youagain for being on our podcast.
It is truly, truly a pleasuretalking with you, truly a
(30:35):
pleasure talking with you, andthanks a lot for sharing the
different dimension about yourparent entrepreneurship and your
style of parenting that most ofthe people will love and will
start to follow after hearingthis podcast.
Thank you again, rocky.
Any last words before we wrapup the podcast to the audience.
Speaker 1 (30:51):
No, thank you for the opportunity to be here and to
share, and we'll see who wantsto actually do something
different.
Speaker 2 (31:01):
I bet it really needs some good bravery to start
doing and acting differently,but we really hope you have
motivated a lot of people today.
Rocky Lalwani, everyone Thanks,Rocky, once again.
Speaker 1 (31:15):
Thank you.
I am a dad.
My kids are older now in thatthey've graduated college and
are out getting started in life,but we've been through that
whole journey, spending timewith them and helping to raise
them and do all of that, andalso to have them as part of the
business and having them, evenup to this day, helping us in
(00:23):
the businesses as well.
So finding that harmony betweenit all and figuring out how to
make it work for you.
Speaker 2 (00:33):
So how did you start your entrepreneur journey?
What motivated you to createthis business?
And try to help specificallythe business owners.
Speaker 1 (00:44):
So this has been a long time in the coming.
I was very entrepreneurial as akid and then I ended up getting
a job and the job was good, soI stayed there a long time, but
it wasn't what I loved, and sothis kind of was more to say
what is it that I want to do onmy terms, the way that I want to
do it, and how do I figure outhow to do that in a way that I
(01:10):
can also build a client basethat would make it worthwhile to
do the business and to walkaway from W-2?
Throughout that time, we'vealways had side businesses.
So even when I was working fulltime, we had side businesses,
we had real estate, always doinga variety of different things,
(01:31):
and I think this was the finalwalk away and just be 100% on my
own choice that I finally made.
But it took a lot of planning,testing and figuring it out
before making that leap.
Speaker 2 (01:54):
That is interesting.
Why, specifically the smallbusiness owner?
What motivated you to createthis business, specifically
helping the small businessowners?
Speaker 1 (02:04):
So I actually started out on the personal finance
side in helping people to buildwealth, because I looked around.
I'm like I don't understand whythere aren't more wealthy
people, and so I was doing that.
But what I found was it wasvery hard to market to them and
also to get people who wanted toactually build wealth slowly.
(02:28):
It's really easy to sell peopleon building wealth fast, but
nobody actually wants to takethe time to do it right, and so
there was a market mismatchthere.
And while I was trying tofigure that out, I came across
this concept that businessowners weren't looking at their
financials.
(02:48):
And I'm like, wait a minute,that makes no sense.
How do you own a business, runa business and have no idea what
your financials are doing?
I mean, that's a principalthing of being a business owner.
And I started to realize thatwait a minute.
Business owners went intobusiness to do what they loved,
(03:09):
and most of them don't love thefinances or the accounting.
They're not looking at thenumbers at all.
And I was like, wait a minute,this is now kind of that market
segment where the skills I haveand the value I bring are badly
needed, and if I can make apivot from personal finance to
(03:33):
business finance.
Then I have the ability tobuild a market, and as part of
that, I read the Profit Firstbook, which was really
enlightening Not so much for howProfit First works, because
I've been doing Profit First mywhole life.
I understand the principles ofit.
What amazed me was that businessowners were struggling so much
with this, and so I tookprobably another year or two of
(03:57):
testing the market, trying tofigure it out, and say is this
really true, will this work andcan I build a business around it
, and is it valued?
And I came to learn that it was.
And now that I've built mybusiness, it's like oh yeah,
this is normal.
It's no longer like I can'tbelieve it.
It's like this is the norm.
(04:18):
People aren't looking at theirnumbers, and if you can help a
business owner to be successful,they don't have a problem
investing and being able to dothat as well.
Speaker 2 (04:32):
That's interesting.
Let's a little bit dig intoProfit First book and what
motivated you.
What are the key points thatyou think are the most common
mistake business owners do?
Speaker 1 (04:45):
So, first of all, there's a couple of things that
they get wrong.
A lot of business owners focuson top line revenue and they
think, oh, if I just sell more,I'll be able to keep more.
What they don't understand istheir expenses are keeping up
with their revenue, if notexceeding it.
So for a lot of business owners, the amount of money left at
(05:06):
the end of the day for them isvery little.
And too often we're told youhave to spend money to make
money, or they hit a hiccup intheir business and they don't
have cash reserves or somethingalong that line happens.
Profit first goes by a simpleequation of sales minus profit
(05:26):
equals expenses, which means youput profit first.
You actually take your profitthe moment you make your sale.
Now it doesn't mean you don'tpay your bills, it means you
constrain your spending, whichis the same principles of
personal finance, right,everyone?
It doesn't matter how much youmake, it matters how much you
(05:47):
save or keep, and so that waspretty much the same principles.
And then I think the secondthing is setting goals, so
setting financial goals for thebusiness and then measuring
against those targets on aregular basis.
I've always done that inpersonal finance, and yet I was
shocked to see most businessowners weren't doing it in
(06:09):
business finance, and so thoseare probably two of the main
things is setting the goals,tracking against them and making
sure that you're actuallypulling your savings, your
profit, first, and making surethat you're getting paid before
you start spending money oneverything else.
Speaker 2 (06:31):
How can anybody do that?
Rocky, can you help us?
Because I think the main sethow the brain works is you get a
little bit of money and thenyou go into this loop of buying
a house, buying a car, take themortgage and so on.
If I'm looking at because it'sa parent entrepreneur podcast,
(06:51):
if I'm looking at a parent whois doing a corporate
nine-to-five job and he wants toactually implement the formula
of profit first, what are thethings they need to consider?
Speaker 1 (07:04):
Profit first.
What are the things they needto consider?
So, first off, if you're in aW-2 job, think about your 401k.
That is the perfect example ofprofit.
First, you put money in your401k before you get paid.
You don't miss it, you don'tnotice.
It's even gone.
And if you increase it slightlyover time?
(07:24):
So let's just say, for example,at the beginning of this year
you're putting in 4%.
Well, what happens if everythree or six months you up it by
1%?
So you go from four to five,then you go from five to six,
six to seven.
Over a period of time, you'llnever miss those small changes
(07:49):
and before you know it, you canbe saving 12%, 15%, 18%.
Now the problem with that isit's all in retirement.
So if you want to start abusiness, it's hard to tap into
your retirement money withoutpaying a ton of taxes.
So then you start a second bankaccount.
So then you start a second bankaccount and every time you get
paid, put a small percentage ofthat pay into a separate bank
(08:10):
account and let it grow.
That will become your seedfunding for your new business
and give you the cash flow toget started and get moving over
time.
And it's the same thing.
Whatever money ends up in yourbank account, I don't care how
much you make, it all disappears.
So if you constrain yourself,you will just naturally not
(08:37):
spend as much.
Because there's no money there,so you don't spend it.
Speaker 2 (08:45):
Hmm, that's an interesting point.
How about if we go and tap intodifferent age groups and maybe
we can go through that part ofit?
If I have a teenager, I thinkyou're a father of teenage kids
who have now grown up.
So if I have a teenager and hewants, or he or she wants, to
(09:10):
have profit first on their firstjob or their volunteer or their
you know, the part-time job,what they're making money off,
how can we train the teenagersto have the profit first mindset
?
Speaker 1 (09:25):
This is the number one mistake of parenting.
Okay, you're trying to changeteenagers.
You failed.
All right, I taught my kidsprofit first when they were five
years old.
When they were five years old,we gave them an allowance.
It was equal to their age, sothey got $5.
Now we didn't have bankaccounts, we had envelopes.
(09:45):
$5.
Now we didn't have bankaccounts, we had envelopes.
Same concept.
So when they would get their $5of allowance, they would take
their $5 and $1 went to charity,$2 went to savings and $2 they
could spend on anything theywanted.
And so we were just building ahabit of them having money.
(10:05):
We were building a habit ofthem saving money because we
told they said well, what are wegoing to do with this money
that we're saving?
We're like well, you can usethat money to maybe buy a house
or do something.
So far in the future you can'teven imagine it.
Now, this is the surprisingthing.
You know what happens?
After 52 weeks of putting $2aside, you have a stack of over
(10:32):
$100.
That becomes a pretty thickstack of bills and over time the
kids start to watch this grow.
Now, as they get older, you canopen up a bank account, move
the money from the envelope tothe bank account, move the money
from the bank account to abrokerage account and start
teaching them how to invest.
But even when they got birthdaymoney, it's the same concept.
(10:54):
Take your gift.
Part of it goes to savings,part of it you can give to
charity and part of it you cansave Now, or part of it you can
spend Over time.
You have to teach them how tospend money appropriately.
You have to teach them aboutcommercials.
You have to teach them aboutconsumerism.
(11:15):
You have to teach them hey, ifyou save up for a few weeks,
then you can buy somethinglarger.
You have to teach them that.
Hey, if you buy a candy bar atthe gas station, it costs $2.
If we go buy that same candybar at the grocery store, maybe
it's only a dollar.
And hey, if we go to Costco,you can get that same candy bar
(11:37):
for 50 cents, but you're goingto have to buy $10 worth right,
because it comes in a largepackage.
Then they start to understandthe principles of how this all
happens.
The next thing you do is thenext time you go to the grocery
store and they want a candy bar,you go, you have your own money
.
Buy it and you will be shockedhow quickly kids will learn how
(12:01):
not to spend their money,because I guarantee you they
will spend your money withouteven thinking twice.
Speaker 2 (12:13):
Spending parents' money, even thinking twice.
Okay, that's a strong one, butI think that gives a reality
check on how to train the kidsto value the money and to think
about the future the principleof profit first.
Again, there is one curiousfact I learned about you but
correct me if I'm wrong is thatyou already have a podcast
(12:36):
called Richer Soul, where you'retrying to help other people
with your tips.
Is it true?
Speaker 1 (12:42):
Yes, I do have another podcast podcast and that
was the original podcast.
So that was teaching people howto build wealth and how to do
that, and but we weren'tteaching what everyone else was
teaching.
So we were teaching a lot ofthese principles, but we were
also teaching it to high incomeearners.
(13:02):
So it was like, hey, if you'rejust going to chase the money,
you're not going to be happy.
It's more than just chasingmoney.
So we talked about all of thedifferent things about how to
live life on that podcast and Istill have it, we still record,
we still do all of that, butthere's no business behind it.
Um, but it's fun and it'senjoyable behind it.
(13:23):
But it's fun and it's enjoyable.
I meet the great people and Iget to give back.
Yeah, that sounds really greatand actually I did an episode
with my daughter.
So that's one.
Yeah, I think it's number 72.
Speaker 2 (13:51):
And we talk about how to raise kids and what we did
with our kids, which was vastlydifferent than what most people
do.
Oh, I will definitely hear thatone for sure.
So, rocky, let's hop into yourjourney.
As a parent, I know you alittle bit touched base about
your belief in profit firstprinciple and how you taught
your kids around it, and youworked in some years in
(14:12):
corporate America while you'reraising your kids, and then you
have your business and youstarted entrepreneurship journey
.
Tell us what went into yourmind when you really wanted to
make in a full-fledgedentrepreneurship journey and
what kind of discussions thatyou guys had as a family and as
(14:35):
kids, why it's hard or why it'schallenging, especially for
parents, to go intoentrepreneurship journey.
What you thought from yourjourney was most challenging.
Speaker 1 (14:47):
So I think the startup phase is difficult
unless you have clients to walkout with, because you have to go
out, you have to build abusiness and that takes time and
effort.
That said, I did this so that Iwould have time freedom and
financial freedom.
I make a lot more than I didwhen I was in corporate.
(15:11):
I spend more time now, probablythan I did when I was in
corporate, but that's by choiceand it's also because the kids
are gone.
If I had to figure out how tocreate the time balance, I would
create the time balance.
I think, more often than not,we waste a lot of time, just
(15:35):
like we waste a lot of money,and I think that's the biggest
thing with parents.
They're signing their kids upfor all this stupid stuff that
is not going to get them intoanything, and we actually talk
about that on my podcast, likewhat is important when it comes
to looking at college?
How do you make it faster andeasier?
(15:56):
How do you not play the gamethat everybody else is playing?
And how do you create the timeto be home with your kids?
How do you create the habitsand the stacks to be able to
have more time freedom with themand to be more involved as they
are growing up.
I coached a lot of their sports.
(16:16):
The advantage of coaching theirsports is guess who gets to
pick when we practice?
I do it goes on my schedule,not somebody else's, and I'm not
running around to 20 differentplaces.
If my son and my daughter bothhad soccer practice, I'd call
the other coach.
We'd work together and we'd beside by side.
The girls would be over there,the boys would be on the other
(16:38):
side.
We do the same night, so thatI'm not killing myself for
somebody else's craziness.
Speaker 2 (16:46):
I think that is a very smart and strategic
approach that most of the peopledon't think, and personally I
see a trend about people go in aherd and follow that somebody
else is following, rather thanstanding or sitting for a minute
, think what is my kid doing?
(17:07):
What are they really good at?
Where do they want to go, andis this class or is this effort
that we are putting in reallygoing to give them value in the
college?
Right?
Each kid is unique in their ownkind.
Each kid have their own skillsand each kid have their own path
(17:28):
to go to.
So the formula that might haveworked for one kid might not
work for the other kid, and it'squite surprising that not most
of the parents think that way.
Would the same thing apply for?
Profit first, too?
Means, for example, there aredifferent kind of families with
(17:50):
different lifestyles, right,different economic styles.
So if we go, if we can startwith middle class family and
higher middle class or richerfamily, I think for every kind
of economical backdrop, profitfirst is their top priority.
(18:12):
It doesn't matter what classthey are in.
Do you agree or disagree?
Speaker 1 (18:16):
Yeah, it doesn't matter how much money you make,
this always works.
Yes, so if we.
Speaker 2 (18:22):
yeah, if you look at the middle class family, or if
there is a family of two kidsand they are school going, kids
in elementary or middle schooland what the parents are doing
corporate America are incorporate America.
What are the things they needto consider?
(18:43):
And start the value of profitfirst lifestyle.
Speaker 1 (18:49):
I think first of all, you have to teach your kids the
value of money and you have togamify it and you, you have to
understand that it's not yourjob to be their bank and just
hand the money whenever theywant it.
Um, that's a big part of it,and so I think if the kids are
involved in family planning,they start to understand what is
(19:12):
involved in having to buy allthe things that they think that
they need, from cell phones tofancy clothes, to all of that.
But you've got to model it forthem so you can't say you can't
have this while you go do it,because they know when you're a
hypocrite and they'll call youout in a heartbeat for being a
(19:32):
hypocrite.
So I think it's learning tomodel it and decide what's
important.
Like I see these parents,they're spending thousands upon
thousands of dollars for sports.
None of these kids are going tomake it to the major leagues,
or if they do, it's like I don'teven know the astronomical odds
(19:56):
.
Might they get some money forcollege Maybe, but most college
sports don't pay that much money.
I think parents spend more onsports than the college will
ever give them.
And then the other question isis college, even the right
choice, and how do you determinethe value of college?
(20:20):
A lot of these colleges areridiculous $300,000 for a
useless undergrad degree.
I would never pay that.
My kids know it.
They're like I said I don'tcare if you get into Harvard,
we're not going because I'm notpaying that ridiculous bill for
what little they teach.
You got to figure out how youcan get through these processes
(20:41):
faster, quicker, easier.
And you got to figure out thegame that's actually being
played, because there is amassive game being played around
you.
And you got to figure out thegame that's actually being
played because there is amassive game being played around
you.
And if you don't realize that,you're just going to hand your
money to whatever Ivy Leagueschool or whatever school that
your kid thinks they should goto.
My son, both my kids, graduatedcollege early.
(21:02):
My son graduated college at 20with an engineering degree.
We got through in a fraction ofwhat everybody else was paying.
We figured out the scholarshipsystem.
We figured out the merit system.
We picked our colleges based onvalue.
We figured out how to go inwith a ton of credits at very
low cost, and there's so manynew online programs, so many
(21:26):
other programs coming up todaythat you've got more flexibility
than you've ever had to getthrough school, and it's only if
you need an advanced degree.
Then you can see about going toa fancier college at that point
, but for undergrad it's prettymuch useless, I think that is a
(21:50):
very interesting fact.
Speaker 2 (21:52):
I have never heard anybody say no they're not going
to yeah, no, and that's I thinkit's very, very honest uh,
feedback, and I really reallythink the listeners will hear
and understand this concept.
Um, because it's like a ratrace and people just you know,
(22:13):
somebody said it, it's a goodone and they just go blindly
right without the planning of it.
Um, let's talk about.
You talked about the value ofteaching the curse of profit
first and knowing the value,knowing what it takes to buy the
awesome things that you want,but also at what cost that
(22:37):
you're sacrificing for others.
What other things we, asparents, should teach the kids
on the work-life balance orenjoying the profit first
principles, but also enjoyinglife at the same time.
What are the principles thekids have to learn?
Speaker 1 (22:58):
Well, first of all, I think they need to under.
Most kids have no idea how muchpeople get paid, right, they
have no idea how much life costs.
So if you're not sharing withthem, or at least teaching them,
hey, if you're looking at theseprofessions, how much does it
cost to go to school?
What is that person going tomake?
(23:19):
Are you happy with thatlifestyle that that salary
affords you?
Is that the kind of work youeven want to do?
People go to all these careerpaths never examining what it
actually means to do that work,and you should have your
teenagers go talk to people inthese different fields and have
(23:43):
conversations to understand whatdoes it mean to work in this
particular field, or is thisparticular job and what are the
income potentials and what is?
How long does it take to getthere?
And is that a sacrifice you'rewilling to make or not make?
Nobody's having theseconversations right.
(24:04):
They just tell you go to school, get a four-year degree,
everything will be OK andeveryone's starting to wake up
in their late twenties now goingwait a minute, that was a lie
and I think kids need to go outand see.
Some kids are.
They might do bad.
I mean, an auto mechanic todaycan make six figures right.
(24:24):
An electrician or a plumberdoesn't have to worry about AI,
doesn't have to worry abouttheir job going to China, right,
and they can make a very goodliving and they can turn it into
a business and they can have avery nice lifestyle doing what
they like, because some kidslike working with their hands
(24:47):
and yet we tell them they can'tor they shouldn't, or this or
that.
So I think it comes back tounderstanding who your kids are,
what they want, and then givingthem exposure.
So I will give a hands out.
I think one of the best programsout there for exposure is the
Boy Scouts.
The Boy Scouts have so manydifferent merit badges in so
(25:09):
many different areas.
They can learn aboutelectricity, they can learn
about welding.
They can learn aboutelectricity.
They can learn about welding.
They can learn about sales.
They can learn about robotics.
They get exposure to adults whoare willing to come talk to
them and they get to start tosee, hey, you've got to teach
your kids how to ask questionsof different people to find out
(25:32):
what is important to you.
And if you hear my daughter'sepisode, you'll see at 16, 15,
she was talking to women whowere in their late 20s.
What were your regrets?
What do you wish you had knownat my age?
What would you do differently?
And that's where she started tosee what other people had
(25:55):
learned.
So she didn't have to maketheir mistakes.
And it wasn't me, the parent,telling her, cause they're not
going to listen to me, but bygiving them the opportunity to
go have these conversations,they are going to learn.
They're going to see it frompeers or from people they might
respect.
And when they start to hear thesame thing from multiple people
(26:16):
, then they start to go, oh okay, and then you can have
conversations with them.
Speaker 2 (26:23):
Makes sense.
How can you and your institutehelp parents to build a profit
first?
Speaker 1 (26:34):
help parents to build a profit first.
Well, so I think everythingthat we we don't have any formal
programs for teaching parents,but throughout the podcast
there's a whole bunch of freeinformation that we share on how
to do a lot of these differentthings, and you just got to find
those episodes and listen inand see what it's different.
(26:58):
But I think the biggest thingis to have an open mind of not
following the herd, because ifyou want to follow the herd,
have fun.
And I'll be honest, when I wasa parent, here's the biggest
struggle I had Do I want toteach these people how to do it
the way we're doing it, or do Ijust want to shut up?
(27:19):
Because you know how mucheasier life is going to be for
my kids if they're all going thewrong direction.
Right, the competition becomesslim to none.
And actually and it's been awhile since I've looked at this,
because my kids are out of highschool Even the NEA is the
National Education Associationthey came out with I think it's
(27:40):
called the four C's.
They're like these are theskills we need to teach our kids
, and then they come out and saywe don't know how to do it.
I'm like I do.
This is how you teach this.
Our kids went to a classicaleducation school, and classical
education is how they used toteach people before the current
(28:02):
school system came into place.
They teach your kids how tothink, how to speak, how to
write persuasively, how to makea point, how to understand the
psychology of how humans makedecisions Okay, and using logic,
(28:24):
and all of these differentthings that we don't teach kids
anymore.
We don't teach them how tothink, we teach them what to
think, and so you have a bunchof sheep running around.
Speaker 2 (28:37):
Yeah, so true, so true.
How can your organization helpsmall business owners around the
world?
Speaker 1 (28:46):
So we do work with small business owners.
We sit in the financial seatfor them.
We help them to figure out whatare their goals for the year,
how their goals fit in withtheir personal desires in their
family life, and how does thebusiness serve you instead of
(29:07):
you serving the business.
At the end of the day, ifyou're going into business to
make more money and have morefreedom, then your business is
supposed to serve you.
Most business owners become aslave to the business.
That's not the way it'ssupposed to be.
So we help them to understandtheir business, to reverse
(29:28):
engineer it to work for them,and then to set targets and
figure out how to make it allwork in a way that works for
them.
I tell my business owners I'mlike you need to take vacation,
you need to do this, you need todo that, and I'll show you how
to make your business pay for itall.
That's what we do.
Speaker 2 (29:47):
And that I think, is very unique compared to what
other people in your industryare trying to sell.
It's working smartly andstrategically and working
towards what works for you best,but also having the profit
first, rather than going intothe cheap world as most of the
(30:07):
other services do right, usingthe old formula that most of the
sheep follow, and I think thatmakes you and your business very
unique compared to others.
So, rocky Lawai, thank youagain for being on our podcast.
It is truly, truly a pleasuretalking with you, truly a
(30:35):
pleasure talking with you, andthanks a lot for sharing the
different dimension about yourparent entrepreneurship and your
style of parenting that most ofthe people will love and will
start to follow after hearingthis podcast.
Thank you again, rocky.
Any last words before we wrapup the podcast to the audience.
Speaker 1 (30:51):
No, thank you for the opportunity to be here and to
share, and we'll see who wantsto actually do something
different.
Speaker 2 (31:01):
I bet it really needs some good bravery to start
doing and acting differently,but we really hope you have
motivated a lot of people today.
Rocky Lalwani, everyone Thanks,Rocky, once again.
Speaker 1 (31:15):
Thank you.
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