https://youtu.be/NQsbgn4iBos
Rocky Lalvani coaches businesses to leverage Mike Michalowicz’s Profit First System. We discuss the Profit First strategy, dissect what a healthy business looks like and contrast good and bad money behaviors.
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Pool Your Profits with Rocky Lalvani
Our guest is Rocky Lalvani, who is a fractional Chief Profitability Officer (CPO). He is a Profit First professional certified by, or based on Michael Michalowicz's book, Profit First, I guess he's a certified professional with the system. He is also a partner, he's a real estate investor and he focuses on rehabilitation type real estate investments. He is also the host of two podcasts, Profit Answer Man and The Richer Soul. That would definitely be good for me to enrich my soul. He holds a Bachelor of Science in Economics from Rutgers and an MBA from Penn State. Welcome to the show, Rocky. Great to have you here.
Thank you so much for having me, Steve. I'm excited to join you today.
So, let's dive in. Rocky, I'd like to understand how does one become a real estate investor? I mean, what is your entrepreneurial journey to real estate investment? And then this whole profit source, how did that come into the picture? Tell us your story a little bit.
So, I have a horrible entrepreneurial journey.
Okay.
As a kid, I always made a buck. Like I would go into New York City, buy stuff wholesale, come back and sell it to all my friends for double what I was buying it for. So I was making money. Computers were just coming out and I bought my first Apple II. And back then they came out with the electronic spreadsheets. So the first one was VisiCalc. I was teaching accountants how to go from paper ledger to electronic spreadsheets.
And while I was in college, I was working in a bank, like helping them with spreadsheets. And the idea in the back of my head was always, I want to start a business and teach people how to, you know, I'll create spreadsheets for you and make it work. In the meantime, I was also learning how to do real estate. So I was learning how to do all the repairs, because if we wanted repairs in our house, we couldn't afford people, we had to do it ourselves. And I actually had my real estate license when I was in college. S
o I was selling real estate, got out of college, had no clue how to start a business, how to approach companies, got a good job that turned out to be pretty lucrative. And the evil of great is good. So for quite a long time, I had a good life and I didn't invest in real estate. I didn't do anything. I kind of like, it was hesitant always. I didn't know what to do. And then probably 20 years later, right? After the last crash, real estate was cheap and we're like, okay, let's start playing around with real estate.
So I started buying rentals and then we started flipping because at that time it was kind of a no brainer business. I already had all the skills. I knew how to run the numbers and we finally got kicked off of the seat of waiting because that's the biggest problem I think so many of us is the fear of starting. So that got me into real estate and once we got started and I figured it out, we just started running with that. I still had this thing with numbers. So by this whole time, I knew how to build wealth and essentially I became a multimillionaire.
I'm like, why aren't there more people who are wealthy? Like, why is this so difficult for people to do? And I couldn't figure it out. And then I realized we aren't taught, like I have two degrees, as you mentioned, an MBA. You're not taught how to build wealth. And then I realized when I was a kid, my parents taught me about money. Most people are not taught about money or what they're taught about money is not appropriate. It's bad money behavior, so to speak. And so they're not taught good money behaviors, unfortunately.
Okay. So, what's a bad money behavior and what's a good money behavior?
Well, so if you grow up thinking rich people are evil, are you ever going to become rich? No, if you get money in your hand, you'll get rid of it because you're like, I don't want to be evil. If you're told that you can't afford that, then you've got this attitude that's very negative towards money. If you're told you've got to work hard for money, you think you have to really work hard, which isn't true. You don't have to do all these things. There are easy ways to do this. It's all money mindsets.
And so if you've got the right mindsets that money is a tool, you get rid of the emotions and you use it as a tool, then you have the ability to build wealth over time. And money is not the end all, right? You talked about my other podcast. Money is just a tool that allows you to do other things. It's not going to provide happiness. So I think that's one of the problems. People are always chasing the money and then they spend too much because they're not taught how to save.
If you've got the right mindsets that money is a tool, you get rid of the emotions and you use it as a tool, then you have the ability to build wealth over time.Share on X
Nobody talks about cutting costs and negotiating and being a little bit frugal. Frugal might be a bad word. And then along this whole journey of learning about people and money, I came across a shocking discovery. I thought business owners understood the business of business. And it turns out business owners hate accounting. They don't want to be accountants and they're not looking at their financial reports. They're doing what they love in their business.
I'm like, oh my God, these people need help. I know how to help them. I now have the point in my life where I have the freedom to choose what I really want to do. And I finally figured out what I really wanted to do. Like what do you want to be when you grow up? It took me a long time to figure that out. Now I work with business owners. I look at their finances and I help them make better decisions. You're a systems guy too, right? You're part of EOS?
Yeah, I am.
So, from that, you understand systems and processes and if you can build systems and processes into your business, things work. What I do is I teach systems and processes around finances and cash flow. There are levers and when we learn to use the levers and learn what they do, the business to business becomes easy. But if you don't understand the money of business, business becomes hard.
Let me understand this a little bit better. You became a millionaire in real estate investing, is it really worth your time to work with the business owners and be a coach to them on their money things rather than investing your time on real estate deals and let capital leverage your time?
I do this because I love it, because I have fun, because it's part of giving back. Real estate can make me money, but it doesn't thrill me. There are parts of the deal that I love. There are parts of the deal I don't love. And honestly, I just don't want to build this big real estate team. I don't want to go through like it's just it's nice I can do it, but it doesn't light me up. Like I don't wake up going, can I find the next deal? Can I do this? That's just not exciting to me anymore.
Helping people figure out their lives and their businesses and being able to see them have that dramatic change in life. That's fun and like I coached when my kids were growing up I coached a lot in sports and in robotics when you can watch a kid for the first time. Like accomplish something they never thought was possible it's exciting. We can help business owners who have been struggling for years even when they've got seven figures in revenue see that they can actually turn this business around, they can hire people. At the end of the day, our country is in trouble right now. The way out is small business. So if we can help these guys hire people, build a strong economy, it's got much more value than just doing some other house.
Ok, I buy that. So I invited you both because of your profile, but also because I like these frameworks that business owners can use and they can implement in their business. I call them management blueprints, but there are other names to it, business operating system or frameworks. And Profit First is one of these. And I love it that you are an expert in that. So tell me a little bit about what is profit first? What does it mean profit first? Of course, we all want profit, but are there people out there who want profit last?
Yeah, there are. Believe it or not, they are. And it's going to be the most surprising person that you can imagine. Profit first is nothing new. It's the system that I've been using my whole life to build wealth, which is essentially something that everyone has heard but no one does, which is pay yourself first. So your accountant has a formula for profit. Sales minus expenses equals profit. Where's profit in that?
That's the result.
It's the result. It's the leftover. It's the last, right? So there's the person who's putting profit last. Mike changed the equation. He said this is not the way to do things. He goes, entrepreneurs need to put profit first. So let's do sales minus profit equals expenses. Even when I do a real estate deal, we figure out this is our profit on this deal. We add it in up front to say, this is what we expect to make. It's built into the model. For business owners, it's the same thing. You pay yourself first, you take your profit first, not last. You don't do it as a leftover.
Most business owners do not know if they're profitable until they go to tax time. The accountant says, congratulations, you're profitable, you lost money, here's what you owe in taxes. The first question the business owner asks is, where is that profit? The accountant laughs at him and says, you spent it and that’s the problem. If you look at a big corporation, every quarter what do they do? They hand out a dividend check. They’re giving profit to the owners of those companies.
