Paying Yourself First with Lalvani & Associates' Rocky Lalvani

Putting Profit First.

Rocky Lalvani is the Founder and CEO of Lalvani & Associates and Profit Comes First.

Profit Comes First empowers business owners to understand and systematize your numbers so that you can spend more time doing what you love. Rather than spending money to hire someone to handle the financials, Rocky helps you take control of your profit and your business in a way that makes sense.

Learn more about how Profit Comes First can help leverage the good habits you already have and put systems in place so it’s easier for you to focus on the work that matters by listening to this episode of The Thoughtful Entrepreneur above and don’t forget to subscribe on   Apple Podcasts – Stitcher – Spotify –Google Play –Castbox – TuneIn – RSS.

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0:00
Welcome to The Thoughtful Entrepreneur Show. I'm Josh Elledge, Founder and CEO of UpMyInfluence.com. We turn entrepreneurs into media celebrities, grow their authority, and help them build partnerships with top influencers. We believe that every person has a unique message that can positively impact the world. stick around to the end of the show, where I'll reveal how you can be our next guest on one of the fastest growing daily inspiration podcasts on the planet in 15 to 20 minutes. Let's go.

All right with us right now. We've got rocky lolani. Rocky, thank you so much for joining us,

0:38
Josh, thank you so much for having me here today.

0:41
So Rocky, you're known for being part of a movement and the name of your company is Profit Comes First. And so you and I connected at FINCON which is a conference for money nerds and I'm on know you have an interesting point of view. And so a lot of people that listen to this program, they're, you know, they're in growth stage startups, they're definitely going through some scaling, they're hiring. You know, at that stage of business, you get a whole slew of new challenges. You know, it's easy to be a consultant. And it's easy to kind of build up a lifestyle income. But if you get the wild idea that you want to serve more be, you know, kind of have a bigger impact in the world is gonna start hiring employees, and then we're gonna start really scaling up. And then it seems like at that stage of business, it's you know, and I learned about this a lot at the Tony Robbins business mastery, of which I've spoke to that audience. And other speakers have talked on this subject of, you know, be ready for surprises. When you start moving in any direction. It's, you know, just be aware that you might, you might be moving Making way more revenue. But you might have cash flow concerns and things like that. Could you kind of give us just a little bit a little bit more on your background and kind of what led you into this? And of course, then we'll kind of talk about kind of the profit first philosophy.

2:14
Sure. So I come from, I'm an MBA, I'm also an EA and enrolled agent. And I've always just kind of had a love of money. And I've always I was the money nerd at fin con. And so I always did that. And throughout my life, I always set up systems to build wealth to pay myself first. And after a while, I was looking around wondering why other people in this country didn't have wealth. And so I learned about money mindsets, and how we have money mindsets that prevent us from building wealth, and kind of going down that that struggle of learning that one of the biggest aha that came up to me was that business owners were not looking at their financials. And I'm like, What do you mean, you're a business owner, surely you understand the business of business. And I found out that most business owners more Doing that they were more thrilled with whatever it was that they their particular craft was. That's where their thrill was. That's where their dream was. That's where their passion was. And they were going after that, but they weren't looking at the financial statements. They, they didn't want to look at them, they frustrated by looking at them, and they didn't understand them. And it became a big aha, that, how are you going to run a profitable business if you're not looking at your profit line? And so that's where I came across profit first, and that's where, you know, that's kind of how I've shifted focus to help small business owners.

3:37
So, uh, go ahead and give us the give us just a quick, you know, like a two to three minute overview of the tenants of profit first I was it's it's more than just an accounting system.

3:51
So it's a basic accounting system that works with the entrepreneurial mindset to shift their focus. So everyone knows the standard equation, which is sales minus expenses equals profit. And in that case, profit comes last. And what Mike did was say, how about sales minus profit equals expenses, which basically means you're paying yourself first as a business owner, which a lot of business owners don't do. You're taking profit how a lot.

4:23
Way to undersell that one,

4:25
sell that one. A lot of them don't take profit. I mean, more often than not, you know, at the end of the year, you get your K one, or you get your tax return from your accountant. And he goes, Well, that's how much profit you made. And hopefully it is profitable. And then you go, where is that money and he kind of laughs at you and says, Oh, it's just a, it's a paper number. It's not real. You spent it. With this system. What happens is, is you're taking your pay off the top, you're taking your taxes off the top, and you're taking your profit all the top, and then what's left your expenses and so now You know how much you can spend on your business, which creates a problem, I think, for a lot of business owners because they're going to say, I don't have enough money left. And that's probably true, which means that you're going to have to start figuring out how to cut expenses, or how to focus your business on the things that bring in revenue that's actually profitable, which means you're going to focus a little bit more on the numbers.

5:29
Well, so Rocky, this this sounds great and intention, but I think the reason why I pay myself last is I can't put myself in a position where like, Listen, if if I am delayed in paying myself a week or so, I'm going to get over it. But if I delay my employees, my staff's time, a paycheck by a week. There are some serious consequences to that. I can't do that.

6:00
I get it. So it, this is not something that we're going to flip a switch overnight, and all of a sudden, everything's going to be perfect. It's a process. So what happens is in the beginning, we sit down and we fill it, figure out your allocations, we figure out how much money should go everywhere. And then as the money comes in, we start putting it where it should go. In other words, where is that money for your employees pay, and making sure it goes there. In the beginning, you might struggle and you might not be able to pay yourself just like it might be in the current situation. But over time, as you start looking at cutting your expenses, which that's the thing with this system, your focus is constantly on Do we really need to spend that money? And then it might just be asking the question, do I really need that particular employee? What value are they bringing to the business to the business? So we're constantly asking that question, am I spending where it's valuable? Because that's the focus and where our focus goes. And our attention goes. That's where we get results. So it's just it's shifting your focus is really what it's doing so that you're constantly looking at the bottom line. There's so many tech companies even today that are spending more to bring in new revenue, then they're getting in revenue. You can't spend $1 25 to bring in $1 in revenue, you never know.

7:27
Right?

7:28
Right. This system helps you focus to say, you know what, I've got to get my costs below my revenue. And I've got to get that gap as big as possible. It's not an overnight solution. It's a solution that over time really forces you to think about your expenses. Because let's face it, I hear business owners say this all the time. It's a tax deduction. It's okay. Right. And the reality is yes, but you can't spend $1 to save 30 cents in taxes. It's not, it's not a solid business plan. It's just about focus. And what happens is, so there's another rule, it's called Parkinson's Law. I don't know if you're familiar with it, but it's pretty simple. If I give you a week to do something, you'll take a week to do it. If I give you an hour to do something, you'll take an hour to do it, right. If I give you $1,000 to run your business, you'll find a way to do it. If I give you 100,000, you'll spend that too. So if we, if we just show you a little bit towards expenses, you'll think out of the box, how do I keep cutting my expenses so that it's in line with that you're going to you're going to be forced to think and to challenge yourself and to your employees and your company? How do we let me see cut costs?

8:48
So Rocky, it sounds like it's you're bringing the right and I think a lot of what you're talking about these would be the things that I would expect a CFO would come in, analyzed and say You know, you know, we need to make some executive decisions based on numbers, not just, you know, hopes and dreams and wishes and, you know, lack of clarity and, you know, maybe some, you know, magic eight ball and some Smurf berries. I mean, it's like, you know, we it, right. I mean, that's kind of what we're doing.

9:22
That is exactly what you're doing. The problem is your average business, it's got maybe a half million in revenue or a million dollars in revenue. They can't afford a CFO, you the owner or the CFO. Yeah. And if you're not a numbers person, now we're stuck. So what we're doing is we're kind of forcing you to be a CFO, without having to look at your p&l statement without having to look at everything. You're looking at your checkbook going, I have no money, how am I going to cut my costs? And so you're working with the way you already behave? We're not teaching you all this fancy mumbo jumbo of financial language. Yeah.

10:01
Okay, so when you engage with a small business, then what does that look like? Do you have just like a monthly retainer? Or maybe you come in and you take a look at the books who you know kind of a different form of bookkeeping and provide some at provide advice and some direction based on what you're finding.

10:23
So what we'll do up front is I work with their accountant and their bookkeeper. And more often than not the accountant just does taxes the bookkeepers doing their monthly bookkeeping, right? We'll dig into their monthly bookkeeping will figure out the percentages of all the different where all your spending is going, how much is going right taxes and all of that. And then once we know that, we'll put in systems for your bookkeeper. And then depending on your business a couple times a month as the money comes in, it will be split off into the appropriate accounts to be saved. And then I'll constantly work with the business owner. So I'll be looking at They're spending constantly questioning, hey, I noticed you spent $1,000 last month, what was that thousand dollars on? And how does it bring value to your business? So I'm constantly challenging them to go. I spent 1000. Because this happens all the time. I, I didn't even remember spending $1,000 on that. What is that? How did that even happen? At times we don't even notice. So I think by doing that, it's the constant focus. So it is like a CFO. Yeah, but because I'm working in a fractional basis, it becomes much more affordable for somebody who's got a half million or a million dollars in sales, to get that high powered person to come in and help them without having to be able to pay for that kind of level of service.

11:44
Yeah, well, listen, I think that it's a really, really smart position to bring in or, you know, consultant position to bring in, I would imagine that your goal would probably be to Generate ROI on your clients investment in you by helping them find cost savings.

12:08
It's it's helping them find cost savings, and it's also helping them identify which revenue is most profitable. Because you might sell five different products in your company, one product might give you 100% profit margin, another product might be zero percent, or you might even evaluate it and go Wait a minute. Every time I sell this, I'm if I add up everything that goes into it, you're losing money. So why don't we stop doing what's not making you money and focus your energy and efforts where your revenue is truly profitable. So it's a two part thing. It's cutting costs and increasing profitable revenues. Yeah, hell right of focus.

12:51
How are you able to look at an expense item and with the CEO determine that that's actually not very profitable.

12:58
I think I think most business owners understand their business. They just you're so busy running in the day to day grind of your business, right? that nobody's taking, especially the people who don't like looking at numbers they're ignoring, right? Because they don't want to look at it. I have my craft, I love doing my craft, I want to serve my customers. I don't want to I look at numbers in my, you know, my eyes glaze over at the end of them. And what I'm doing is helping make it more comfortable for them to look at the numbers in a way that it's not like, glazing their eyes over is so can can you create

13:37
a like some attractive user interface? Some interpretation of the numbers,

13:45
honestly, what we do is if you look at an average spreadsheet, you might have 2530 different line items on there. So we focused what I do is I take those 2530 line items and bring it down to two or three. So make it simple. Make it very easy for them to understand their financials, give them actionable steps of what they need to do these two weeks. And a lot of times I think it's them going and doing an investigation, like, why are we doing this? And why did this money gets spent? Where Where is my most profitable business. So it's that constant give and take, but it gives them something actionable to do. every couple of weeks in, you're constantly tweaking the business. This isn't an overnight solution. Usually, I will go with somebody for at least a year to help them constantly make small, small tweaks. And it's also when you're going to go buy a new piece of equipment or making investment. We'll sit down, we'll run the numbers and go does this actually make profitable sense or is there a better way to do this now and you're currently planning? I like that,

14:54
Rocky, that's pretty cool. I dig that. So I mean, what do you know? I mean, what are your rating? Like, you know, how does that how do you do pricing for your services.

15:03
So it's a value based pricing, I usually will look at the customer will look at their current profit margins and see what I can deliver in value. If I can't deliver in value, there's really no reason to pay me right? At the end of the day, we should be able to get a multiple of the profit that I can deliver to you. And so it really depends on the size of the business how much work I have to do for that particular business. But I will tell you, it's it's extremely affordable, we try to make it a no brainer decision for the customer. So as long as you've got half a million in revenue on up, it's usually a no brainer decision.

15:43
That's great. And what about if it's someone that's like maybe they're closer to you know, they just hit six figures. I mean, my so the audience for that usually like, you know, every bit of you know, a lot of people listen to the show now, and best as I can tell, we have we have a lot pretty Everyone's full time or they're real close to full time like they have an imminent exit of their full time job into doing this more full time. Definitely in that, you know, I'd say 80 to $200,000 range it's we provide a lot of great content for that we get some that are they're definitely the you know, they're definitely the Inc 500 and they're never but you know, a lot of momentum in this crowd. So

16:27
my suggestion for them for those people go by the book, it's under $20 by the first book by Mike mccalla Wits I don't make a penny off of it. I'm not just go to Amazon or wherever you like to buy books. buy the book, read the book. If you've got questions or you want a cheat sheet, just email me I'll send you a cheat sheet. And if you want, I mean, they can even email me and I'll sell them a couple chapters in the book for free if they want, that's fine. If you just need a one Time, like, hey, I've read the book, I think I have it right. I just want a one time consultation, I will do that at a very, very reasonable cost will sit down for an hour or two will just get you set. You know, if you're $100,000 business, and you spend two hours with me, and you just get it set and then you go execute, who do I, I'm at the point in my life, I retired from my corporate life. I'm not doing this for money. This is I've already made my money I already paid myself first I'm set for life. This is my gift back. I'm like, Why are there more people like me? I'm an immigrant to the United States. I've been blessed. There should be more millionaires. There should be more people who can do this. And yet we struggle. And so a big part of this is to give back.

17:48
Yeah, all right. So Rocky, people can connect with you. They go to profit comes first.com you know, if you're maybe not quite at that lovel yet and you want to get a primer before you reach out to rocky on the reason I kind of I was kind of laughing while you're talking because I just pulled this up on Amazon profit first by Mike my Calaway x. I'm sorry I didn't pronounce that correctly 1546 ratings it is at a 4.8 like it's got all five gold stars. When you look at the when you look at the listing, that is incredible. So there must be some good

18:32
luck. You follow the system. If you can read a book and follow the system. Go do it. If you get in you have friction. Ask for help. It works. I can't tell you how many stories I have heard of businesses that have been gone from losses to profit. over top like within a year dramatic turnarounds. People can sleep at night people can invest in their businesses. People can pay Hey there employees, like if you scale up and all of a sudden your business explodes. And your accountant calls you up and goes, have bad news you owe 200,000 in taxes. You go, Oh, it's no problem. It's in My Tax Account. Let me cut you a check tomorrow. And the accountant falls off their chair, because that's not how it's normally done. Yeah, system protects you on the upside, and it protects you in the meantime. That's

19:24
great. I'm really excited Rocky Lalvani. Well, Rocky, thank you so much for joining us again, you're on the web and profitcomesfirst.com. You know, again, go grab that book Profit First from Mike M. He's got it. He's got along. I mean, I have enough time. I have a hard enough time with Lalvani expect me to say Mike's last name. But Rocky, thank you so much for this conversation. And hopefully we've helped a lot of great business owners out there by kind of taking a look at how they're running their numbers and how they're allocating the resources as well. Thank you. So much. And thank you, Josh. That's all I want to do is help them succeed.

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