Intro: Broadcasting live from the Business RadioX Studios in Atlanta, Georgia. It’s time for High Velocity Radio.

Lee Kantor: Lee Kantor here another episode of High Velocity Radio and this is going to be a good one. But before we get started, it’s important to recognize our sponsor, Stone Payton Managing Partner with Business RadioX. If you are a business coach who’s tired of being a best kept secret, set up a call with Stone at bookstonephone.com to unlock your perpetual prospect pipeline. Today on the show, we have the owner and prophet answer man with Profit Comes First, Rocky Lalvani welcome.

Rocky Lalvani: Thank you Lee. Excited to be here with you.

Lee Kantor: Well, I’m excited to learn about your firm. Tell us about Profit Comes first, how you serving folks.

Rocky Lalvani: So basically we work with business owners And the surprising thing, at least surprising for me was that most business owners don’t pay attention to their financials. They went into business to do what they love in accounting, and the business side of business wasn’t high on that list. And I think that’s why a lot of business owners struggle. So we come in and we help them on that side of the business, and we help to make sure that they’re profitable. They make money and that they can do the things they want to do in the business and serve their clients the way they want to serve.

Lee Kantor: So what’s your backstory? How did you get involved in this line of work?

Rocky Lalvani: I have always been a personal finance geek. So I’ve always loved spreadsheets, love looking at tax returns, love looking at the numbers and figuring out the story behind the numbers and why they happen the way they they do. And I was always like, I don’t understand why there aren’t more wealthy people in the United States. I’m an immigrant here. I learned about money as a kid because our parents kind of talked about it. It wasn’t a taboo topic, and I wanted to teach people about money. What I learned, though, is that most people want to get rich quick. Very few of them want to actually take the time to build wealth. Everyone wants the lottery mentality. And then along that journey, I realized kind of what I said before, that most business owners weren’t paying attention to the finances in their business. They were making decisions based on gut instinct or whatever. And I realized I can help them and they want to be helped. And so that’s really where it kind of came together. Was that final pivot of finding the right audience and working with the right people.

Lee Kantor: So did you did your practice? Were you always serving kind of the market you’re serving now, or did you have kind of a different type of job and then kind of moved on to serving the business owner.

Rocky Lalvani: I was doing something totally different outside of this. And then I built this as what I really wanted to do and what would serve me best. And I figured out it took a long time to figure out, how do I meet the market where it is and what would actually work in alignment with what I wanted to do. So it was a 180 degree switch when I started the business, uh, from what I was doing in the past, but everything I did in the past gave me the skills to be able to do this as well.

Lee Kantor: Now you call yourself the profit answer, man, and not the revenue answer man. Why do you do that? I’m sure that was intentional.

Rocky Lalvani: It is intentional. I think a lot of business owners, they fall into what I call two different categories, those that chase revenue and those that actually chase profit and cash in their pocket. And I, I find a lot of them chase revenue, and it’s surprising to me how many business owners will be at 7 or 8 figures of revenue. And they’re like, I don’t understand. I’ve got more and more sales, and yet I’m working harder and harder, and I don’t see the rewards of what happened. And that’s kind of that flip of focusing on the actual profit. People went into business to make money, and yet a lot of them aren’t. And so we really focus on the fact it’s not how much revenue you have, how much cash do you actually get to take and remove from your business to support the life that you want it to build?

Lee Kantor: Now, why do you think that, um, kind of revenue is the first, um, target for a lot of business people? Like, is that just the easiest one to see? Because it’s obvious. You know, I think cause x I sell a hundred of them, I get 100 x. That’s math. I can kind of understand.

Rocky Lalvani: So I think that’s correct up front. I think it’s just the fact that it’s easy to see. And the reality is, when you first start a business, it is the most important thing. I need to generate clients and customers and I need to generate revenue. And so in the beginning, it’s about finding product market fit, which is revenue is the answer. Do people actually buy from me? And it’s easy to see profit if you don’t have a good accounting and bookkeeping system and all of that. A lot of business owners don’t even find out if they’re profitable until the following year when the tax return gets done. And then the CPA says, congratulations, you made money or you lost money. And a lot of business owners are they’re stuck at that point. They’re like, wait, you I made a profit. How come there’s no money in the bank account? Or the CPA says, well, you lost money so you don’t have to pay taxes. And then they’re like, well, how come my bank account’s full? And that’s where I think the struggle is, is that revenue doesn’t equal cash in the bank. And depending on the business model and how it’s structured, you have to figure out how it works for you.

Lee Kantor: And then I think a lot of people are kind of blinded by maybe the law of big numbers, like if I’m making this much money or this much money is coming in, I must be making money. Like it just, it doesn’t compute that this much money could be coming in and I’m not making any money.

Rocky Lalvani: And, and that’s a mindset shift for a lot of business owners. And it takes a while for that to kind of hit. And a lot of that comes also, if people have ever read the the book profit First by Mike Michalowicz, that’s a big part of it. Everyone is told that the equation for profit is sales minus expenses equals Profit, which means profits are left over. So even just the mentality of of others is profit something that happens in the future. And what Mike said is this isn’t the way to look at it. It should be up front. So he does sales minus profit equals expenses. You pay yourself first, right? Everyone’s heard that you take your profits first. You design your business to be profitable first, and then you constrain how much you spend on your expenses. And that’s really the key. Too often we’re told you have to spend money to make money. Of course, it’s always salespeople telling us that, trying to get us to buy something that’s not necessarily true. You have to figure out how to run your business and make a profit up front.

Lee Kantor: So now what is kind of the ideal client profile for you at this stage of your career?

Rocky Lalvani: So at this stage we tend to work with seven and eight figure business owners. They have already figured out how to generate revenue, and they generate enough revenue that we can actually figure out the levers in their business to determine where should we put our effort, time and money to optimize the business so that it’s going from something that’s putting out a little bit of profit to a business that’s making a lot of profit. And as we look at their system, there are a whole bunch of different levers that can be used. I don’t think most business owners know which ones to use. Most of them just push the first one, which is revenue. They keep throwing marketing dollars and hoping that everything else will work out. We actually look at all of the different ones to say, if we make small changes in different parts of the business, where can we get an outsized return? And when you couple a couple of small changes together, it is amazing the outsized returns you can get. But you have to know where to look. And so that’s kind of the key. What we do is investigate and figure out how does this business math equation work? Because every single business is different. And how do we then optimize it so that we can work less, make more, have fun. That’s why they went into business, right? For those reasons. And yet they never actually built a model that would do that for them. They just went out and started selling.

Lee Kantor: Now, you mentioned that revenue is usually the place that most people look to, to solve whatever issue they have. But you mentioned that there’s other levers to pull. What are some of the other levers that a business owner can pull that might help them get to more profitability?

Rocky Lalvani: So the leavers drop into three different buckets. The first bucket is how to drive revenue. So that is important. Let’s not say it’s not. The second set of leavers are about driving profit. And then the third set of leavers are about driving cash flow. So the first thing I think business owners need to realize is revenue doesn’t equal profit and profit doesn’t equal cash flow. So you can actually be profitable and have no cash. And that’s kind of the thing that people need to understand. So if we looked at some of the levers, one of the biggest levers that business owners can pull on is pricing. And I think in the beginning, they’re afraid to pull on the pricing lever. For a lot of businesses, if you’ve got a 10% profit margin, a 10% increase in prices results in a 100% increase in profit. Now, not every business owner has pricing power, but we work with them to figure out how to get pricing power. Another might be something as simple as retaining your clients. How often do your clients leave? It’s a lot easier to keep a client than to get a new client. So think about the car wash industry. You know, back in the day, car washes were there and people would show up whenever they wanted and you’d pay X amount of dollars and you’d get a car wash and you’d leave. Somebody looked at that industry and said, hey, how do I turn this into recurring revenue? Now, every car wash out there, you pay a monthly fee.

Rocky Lalvani: Come as often as you want. That business now has recurring revenue, and that recurring revenue makes the business extremely valuable. All of a sudden, they can predict cash flow and and their multiples went from 2 or 3 times to eight to 10 to 12 times because they changed the model. So how do I turn my, my revenue into recurring? The other thing is looking at gross profit. So here’s the other issue. When you run a business there’s two sides of running a business. The first side of running a business is delivering whatever that product or service is. So if we go back to the car wash, how much does it cost you to wash the car? Right. What are your costs involved with that? But beyond running the car wash, there’s a whole bunch of other business costs. Those costs might be marketing, management, administrative, the accounting system, the attorney, all the other things. That’s the cost of running the business. So a lot of business owners don’t understand the differential between those costs and whether or not the business even has enough gross profit left to cover the cost of running the business. And so those are some of the other levers. And then the last set of levers are the cash levers. And so if you think about a business owner, he’s like, oh, no, there’s no money in the bank.

Rocky Lalvani: What does he do? He runs out and he sells something. But just because you sell something doesn’t mean you got paid. You might now have an accounts receivable and the customer might not pay you 30, 60, 90 days out. But now you have to go deliver a service which makes you even broker because now you’re doing the work and you haven’t even gotten paid. A lot of business owners, it sits in an inventory, right? It’s sitting on their shelf. They have all this cash tied up in the products that they made waiting for somebody to buy them. And so understanding that your debt service loads and how much you’re paying for that, those are all levers that we have to look at. And so when you put all of this together, it’s one big combined system and you start to see how different levers affect other levers. So I might want to spend more on marketing. What does that do to my leads? And if I get more leads, do I need more inventory? And so now I have to pay for inventory. And when am I actually going to get the cash from the customer? And when’s it going to hit my bank account? All of that’s got to come together. And it sounds complicated, but once you understand the system of your business and how money moves through it, it gets pretty easy.

Lee Kantor: Now, when you’re working with your clients, you mentioned, um, a lot of folks don’t even have kind of the aha moment or the, the epiphany of, hey, how did I not make money until they’re having like their, you know, maybe an annual conversation with the CPA? Is that kind of a trigger usually for you for somebody to call you? Uh, it was when they have that meeting and they’re like, how is this even possible? And then why am I paying this person to tell me something that already happened instead of giving me some proactive information that’s going to solve this problem next year.

Rocky Lalvani: And so I think that that is the other thing that happens. And I’ll give you the example of building a house. When you build a house, there’s a lot of different things that go into building a house. And we call all those people, right, people who work in the trades. But if I’m building a house, am I going to call my roofer and say, can you put in an Hvac system? I mean, you could and maybe they’ll do it, but they’re probably not going to be the best at it. They have different parts of building a house in the world of finances. There are different parts of finances, and I think a lot of business owners ask the wrong question to the wrong people. So they might ask their bookkeeper what’s going on. Their bookkeeper isn’t skilled in answering those questions. Their bookkeeper is usually good about taking all the transactions and putting them into an accounting system. More often than not, their CPA is good about doing their taxes. But they’re not good about how do I make my business more profitable? How do I actually make a change? Those are different kinds of roles. And so that’s the role we sit in. How do we make our business more profitable? When do they call us? More often than not, when they’re in trouble, they call us because, you know, they’ve got $4 million of revenue and they’re still struggling to meet payroll next week.

Rocky Lalvani: And they’re like, I’ve had enough of this. I’m frustrated enough that I want to do something about it. And then you have the proactive business owners who are like, look, I love doing these parts of the business. I understand the purpose of business is to make money. I want somebody with a finance seat who actually can give me the answers to my questions. Can I buy a new truck? Can I hire a new employee? Does it make sense to spend money on marketing? Do I have the right pricing? They want someone to help them answer those questions. And so those are the two places that we find people, those that proactively say, hey, let’s build this right. And usually those are people who’ve already had a business or two and have gone through the ups and downs. And then there are the ones who built a great business on the revenue side, but they’re still struggling, trying to pay payroll and do the, the things on the on the money side, or they have a seasonal business. And so they’re like, okay, during the good times, everything’s great, but how do I get through winter? And so that’s when those conversations start to happen.

Lee Kantor: So do you sit alongside the bookkeeper CPA? Are you a separate entity? So now I have to have a bookkeeper CPA and you or do you replace the bookkeeper CPA? Like, how does that kind of work?

Rocky Lalvani: They are all separate functions and somebody needs to sit in each of those seats. We don’t replace any of them. We will help to have the conversations with them. So a lot of times the business owner doesn’t know how to talk to the bookkeeper about that part of it. The business owner doesn’t know how to talk to the CPA about the tax part. And we help facilitate those conversations. But they’re all separate conversations. If you’re building the house, you’re not going to go, I’m going to build a house, but I’m not going to worry about the foundation. Right? The foundation is the bookkeeping. You’re not going to build a house and say, well, we don’t need windows, right? You still need that part of it. So you need all of these different functions, and they all have to be served by people who do them. There are firms out there that do everything for you. And and you can go to somebody who does everything for you. It’s kind of like Walmart. You can go to Walmart and get everything, but you’re not going to get the best of anything. So it’s a choice of what you want. Do you want to work with somebody who really specializes in the particular thing of driving profit, driving cash flow and optimizing the business? Or do you want to work with somebody who’s kind of like a one stop shop that does it all.

Lee Kantor: But is somebody the quarterback or am I the quarterback? And I have to make these choices? Like, how do I even know who the best CPA is that works within this system, who the best bookkeeper is, who the best version of you are? Um, like, are you the quarterback and helping me get the right, you know, people on the bus? Or is this something that this is, becomes, you know, ultimately, obviously it’s my problem as the business owner. But, you know, with your house analogy, there is a general contractor usually who’s overseeing the project. It’s not like the owner is building the house or overseeing it.

Rocky Lalvani: Correct. So we will help the business owner pick the right people and we’ll oversee that they’re doing things correctly, and we may make a recommendation to the owner. And the owner usually knows, hey, I’ve got the wrong person because I’m not getting the stuff I need in a timely way. And then we can make the recommendation of being able to find a better person for them, or finding a better fit, or helping them improve so that they are doing what that owner does. So we will come beside them and help educate them to make a better decision. Ultimately, it’s up to the owner who he wants to work with. But yes, we will help them make better choices. And that goes for every other seat. A lot of business owners hire marketing companies, And it’s one of the areas that we find the most money wasted. And so we’ll sit down with the owner and saying, hey, is your marketing company actually delivering a return on the investment you’re making for them? Yes or no? And if they’re not, then we’ve got to go find a new marketing company that works for that particular business.

Lee Kantor: So do you have kind of relationships with vetted CPAs and bookkeepers that are kind of aligned with you with this profit first kind of, um, methodology?

Rocky Lalvani: We do. We have people that we can recommend, um, to work with that we’ve worked with in the past that we know that when we pick up the phone and call them that they are responsive and that we are on the same page. So we can help facilitate that if that’s what the owner wants. A lot of times they have people in place that they’re happy with. The taxes are done well. It’s just that they’re not telling them how to make money next year. And so it just depends on the situation we are. We’ll work within whatever ecosystem they need us to work with.

Lee Kantor: Right. But I mean, CPA’s, a lot of them make a promise that they’re going to help you with some of the things you’re talking about, but in reality, they are just, like you said, just kind of helping you with their tax. They have a tax first mentality, not a profit first mentality.

Rocky Lalvani: And you are correct. So we actually we have another part of our business that does do the tax side. So for larger businesses we do we do take on the tax work. And so then in that case we’re making sure that the right tax decisions are done so that it’s holistic. And what I mean by that is sometimes a business owner wants to pay less than taxes. So they drive their, their, you know, taxable income way down. But here’s the problem. If you drive your taxable income way down and you want to get a mortgage next year, no one’s going to give you one because you have no income, even though your business makes money. So you have to take that into effect. The other thing is, are you spending $100 to save 30 on taxes? That’s not a wise business decision. How do we do this appropriately and in a balanced way that we make money and we pay the least amount of taxes? Not that we’re making other people wealthy just so we can save on taxes.

Lee Kantor: So now, do you have any advice for the listener right now? Is there low hanging fruit they can do right now that’s actionable when it comes to at least maybe shifting the mindset from a tax first or revenue first mentality to a profit first mentality.

Rocky Lalvani: So I think the first thing is how profitable are you and what does that look like? And I don’t tell people to look at their profit. What I tell people is, how much is your gross profit? Because your gross profit is going to show you what you can run your business on and pay yourself. So first off, understand what your gross profit is, how it’s derived, and what it really is, because that’s truly the money you have to run the actual business after you deliver your your customers value. That’s one of the biggest things I always challenge people in a world of inflation. You’ve got to know your costs. You’ve got to adjust your pricing. It’s just the reality. And then how do you get money in the door faster. So again the accounts receivable. How do you get paid up front and recurring versus later and non-recurring.

Lee Kantor: So if somebody wants to learn more, have a more substantive conversation with you or somebody on the team, what’s the website? What’s the best way to connect?

Rocky Lalvani: So the website is profitcomesfirst.com and on the website you’ll find a whole bunch of things. You can get my book for free, which explains everything we do. You can find the podcast where we talk about everything we do. You can even find the profit calculator, where you can run all of these numbers and that one big equation for your business and you have the ability. So we give everything away for free. Go listen, go learn, get the stuff. And then if you want to have a conversation, there’s a way to book a call.

Lee Kantor: And that website once again is profitcomesfirst.com. Rocky, thank you so much for sharing your story today. You’re doing such important work and we appreciate you.

Rocky Lalvani: Thank you so much for having me here today, Lee.

Lee Kantor: All right. This is Lee Kantor. We’ll see you all next time on High Velocity Radio.