John:   0:01
welcome to brain radio. In this episode, Chris Cooper talks with John Briggs of Insight. Tax accounting congee tedious, but John is far from it. He's an engaging numbers expert who sometimes wears an i. R s sucks T shirt. In January 2020 John will be launching his book Profit First from Michael Jim Aneesh adaptation of Profit First by Mike McAlary. Listeners coupon Briggs banter about the book and discuss how gym owners can get their finances in order and thrive. If you know a business owner who keeps his receipts in a shoebox and goes nuts attacks time, please share this episode. And now Chris Cooper with John Breaks John breaks Men. Welcome back to the podcast, brother.

John:   0:42
Thanks, Chris. I really appreciate me.

Chris:   0:44
Yeah, it's always a great time. And, you know, there aren't many people I would say are the most fun accountants in the universe. There could be only one insurer, right? But I always

John:   0:55
I appreciate that. I I'm gonna try to hold that title for the rest of my life.

Chris:   1:00
Well, I mean, let's face it, like this T shirt that you're wearing right now just took us on a 20 minute tangent before we started recording. So why don't you start by describing your T shirts?

John:   1:09
So my shirt says, Feed your profit and it's a no managed to Mike McCallum wits and has a picture of a pig on it. But if you look really closely, the outline of the pig is actually words. Um, which we'll talk it talks about, like some of the principles of profit first, like smaller plates. But it also gets into our philosophy like the government sucks. It's spending your money. Folk sites. Focusing on size doesn't matter. Profitability is more important, things like that.

Chris:   1:38
That's great, man. And we're gonna get into that today. But, um, you know, it's worth coming to the two brain summit just to see what Briggs wears. Because his T shirts every your epic and you could sell the body like screw the I. R. S. Yeah, you know, it's great. All right, well, let's start. Let's start at a high level. You mentioned like McCalla wits. Mike is gonna be speaking at our Tinker meet up in September. Mike has written several books they were gonna talk about, I think the most popular one profit first, so tell us, just you know, what's the overarching strategy or philosophy of profit first?

John:   2:14
Yeah. And I This is great. I'm gonna start with. We've talked to some people and they the first time they hear the word or book profit first, like Oh, my gosh, Shame on you. Which is kind of a problem has been in the industry with the fitness industry in general, which is shame on you if you actually make money. Because first thing I think they go to ISO. You're greedy. You should focus on your members first and things like that. It's not what that's not. What profit first means. It's It's more of, ah castle management system with the philosophy that if you focus on money that's left over and try and have as much of that is possible. And so what I mean by money left over is we look at income coming in, and then we look at the cash flow that goes out well. If you want to be in business, literally, you have to have money left over after the cash flow leaves. It's just it's not gonna work, because if if you don't have money left over your funding it with a second job or you're borrowing money. And that can only last so long or your friends and family are funding it because they love you. And that's also we're gonna last so long. Um, so it's really just a an overall philosophy that if you focus on making sure you have money left over, you can continue to focus on serving your members. Um, a lot of people may not be aware they're aware of this, but I know they are. If they think about the times I look at their financial statements or a tax return, both are in the exact same order. You start with the income, but the top you have, the expenses that air subtracted from, and what's left over is that income and what we're gonna call that for the sake of profit first, that's profit. That's what we're looking at. The problem is from a human behavior standpoint, that equation doesn't help us with the way we're. We've been wired from the creation of time. And so Michael Callow it said, You know what if I just flip the equation so mathematically I'm not changing it, but instead I'm gonna take my income, and the first thing I'm going to subtract out is profit. And really, when he says Prophet, it's a sexy way to say cash for the benefit of the owner because of the other day. You are the most important person in your business. And if you're not taking care of, you're gonna burn out, and then you're gonna have less of a desire to keep the doors open, Which means less people are gonna have health because they need you anyway. So he just says, Let's just take out a predetermined amount first and force the way we're wired to take hold, which is we will use. The resource is we have available to us, and all we're doing is we're arbitrarily giving us a lower amount that we're forcing ourselves to use. And guess what work? There are so many stories and examples across, um, the world and end in industries that show that we will survive. We will find a creative way to survive with the resource we've been giving. And so instead of just income coming in, I'm gonna spend and spend and spend and hope and pray some things left over were saying, Let's actually determine how much we want leftover first, then we'll use the rest. That's kind of the overarching foundation,

Chris:   5:34
and that's really you know, there's a term for that called Parkinson's Law. But when I was giving a seminar last week, a guy said, Chris, how do I get my gym profitable? And I said, You've got to start with the mindset of profit first. And when I wish I had said, though I wish I had given him the example of the tube of toothpaste. Yeah, Why don't you share that with the audience? John?

John:   5:56
Yeah, uh, this is funny. Mike didn't include this example in his original book, and I had started using it, and we had talked about it, and they included it in a second book. So in my book, I give credit to him for the tube of toothpaste Imperial. But I think I actually came up with the first

Chris:   6:16
Lose me for sure.

John:   6:18
So it's they were just human. Behaviorally. Think about how you use your toothpaste if you it's a brand new tube you're looking. You have your toothpaste and your tube and your brush, man, you're not paying attention to how much to face to use. And you're just how that thing on. Oh, I got too much water on it and now it's lift off. No big deal. I have a whole to Pierre only just squeeze more on. But then all of a sudden, you get to the bottom and we get super fancy with the way that we're taking toothpaste out of this tube. And now all of sudden fat paste falls to the sink. Your thinking. When was the last time I cleaned my sink? Is that still clean? Yeah, that's right. Clean 12th rule. It'll be good.

Chris:   7:04
Use it.

John:   7:05
People are like doing the roll up method. They use rubber bands. I found a product on Amazon that's called like easy tube squeezer thing. I get the actual product people by to help do that. Some people cut off. I mean, it's just like the amount of creativity people put into making sure they use every last ounce. Um, and that behavior actually does translate to this method because we're saying, Look, we're asking you to take the money that you want first or and not just what you want, but what your gym can could afford or should afford. And let's use the rest were giving a false amount that's left in the tube so that you can be creative and use the rest to run the business instead of just kind of adding fat to your expenses.

Chris:   7:50
All right, you're a gym owner, and I know you know this was my own bad habit at the end of the month. If there's $1000 left and I had to choose between paying the rent or paying myself, I would always pay the rent. And so, you know, I would never scramble hard to pay myself. But if it was the rent that was doing, I didn't have the money. I would get super creative, right? I'd be like pinching that tube be Robin in two by my desk, you know, as a gym owner, you know, for some reason we weren't really hard when we're in debt to other people. But we we don't take our debt to ourselves. Maybe it's seriously

John:   8:27
yeah, and I am glad you brought up that example because I think about owners and potentially they're imagining that scenario where they're at the end of the month, and they're having to decide between a critical expense like Ren or paying themselves. And maybe they're telling themselves, Well, that's why this method isn't gonna work for me. Um, but the truth is, it will work, because if you would have taken that $1000 the beginning of the month, you you would. You have to have confidence in yourself that you wouldn't have put yourself in the position to have to decide between those two things. By the end, you would have found a way to pay your rent if you decided to pay yourself $1000 at the beginning.

Chris:   9:08
You know, it's funny. I think I've heard of this strategy with saving for retirement or like tiding to your church. Just take 10% off your paycheck and you won't even notice it's gone. No, that's been words of wisdom for 70 years, but we never beat out with our business and just pay ourself the revenue in advance, right? Eso John. Like what? What made you want to take this big concept of profit first and write your own book that's specific to the micro Jim. Niche

John:   9:38
s O we we deal with hundreds of my deal is not the right way, is it? We have the pleasure and privilege of working with hundreds of gym owners. Yeah, there's a reason we focused on two motors because they actually are so much more enjoyable than other professionals. Um, and having done hundreds of assessments where we're trying to help these gym owners determine how healthy there, Jim is what they should be putting in, like how much they could pay themselves every single time we had to tweak the profit first model and then going to places like the two brain summit. Um, and other industry event says we're talking to people like, Oh, profit first. Yeah, I heard about it, but nah, you like you heard about it. The response should be I heard about it and hallelujah. You know, instead of getting these people who were like, No, it's not gonna work for me. So I started asking questions like, Why isn't gonna work for you? Well, the book doesn't like things were different for us in the micro Jim industry on, and so I felt like I get it because you know they're there. Ninja skills are not in taking the proper system and seeing how it can apply to them. They need to be told how to do it. And I wanted to get that message out to the industry because I actually think of industries that exists in the world. Being a micro gym owner is one of the most noble ists, and the benefit that comes from the service is you offer as a gym owner are so much more profound than I think. Sometimes we give ourselves credit for, like, just the idea of increasing somebody's health and what that does to their life. And then now there having more health in their life and you have about 10 people around them become healthier like just the whole world could be healthier if micro gym owners could stay in business. So, um, I felt like I wanted to make sure they had a message and to know exactly how the system works with them so that they might not feel discouraged when they read a generic book and they can see how it directly applies to them.

Chris:   11:51
That makes a lot of sense, you know. And even with the generic book, you know, we referred it to a few people about 22 and 1/2 years ago and in the first month, two of the gym owners that we gave the book to bought a house. And it's not because they were suddenly making twice as much money. It's just they have this mindset change. So, John, like, what are some of the things that you have taken from the original message? But then Taylor down toe are specific.

John:   12:17
Um, there's a few. The 1st 1 will start with is Ah, if you're familiar with the book. Mike analyzed thousands of companies, and that's how he came up with his table. But the companies he analyzed, where multiple industries, um on. So what we did for the book is we actually looked at financially, fit gyms and just gyms and created a new table. So instead of like, whatever he had five cat five columns of revenue sizes. We only have three because we want people to run profit first per location, not on their overall. Uh, we have a client in New York. They have, I think, at this 0.5 five locations, we want them to look at profit first on an individual basis and not just Hey, we're doing more than a $1,000,000 because we have five locations. Yeah, but you have three locations that are great. You have to that, you know, kind of need your attention and profit First helps you see that. So anyway, so we have three table are three columns. We also adjust the percentages, um, to make sense for the micro Jim industry. And with that, we added two new categories. So Mike has what he calls like the foundational five accounts. We have what we're calling the essential seven eso we've added. So the the five accounts, let me just go national. At the two. You have the income account. We have owners pay, we have tax, we have profit. And we have operating expense or OPEC's, as we call it. Um, with an acronym thing. We've added team member expense and equipment. So those are the separate buckets that we've identified. Make the most sense for micro gym owners on the table reflects percentages for those seven accounts as opposed to the five. Um, yes. So that those are kind of the main differences, but let me go into the team member bucket

Chris:   14:22
yet please do. Yeah,

John:   14:24
the reason we wanted to add that, but talk about, like, customizing profit first, Before this book came out, every client who came in, um, we were trying to figure out Well, how do you pay your coaches and not the W two verse 10 99 thing? Because that that does come into play. But, oh, you pay him a percentage to pay my floppy a flat feet, Is it? Salary is. And we realized there's like seven or eight different compensation models out there. And every single time we have to figure out, How does this relate to Michael A Caliph's definition of real revenue? Because in his book, you have total income, you subtract out materials and subs, which for a microt Jim means cost of the things that you sell in the gym and the cost of your coaches If they're not employees and every time is like Okay, how do we do this for, you know, Bob Chris, Bob CrossFit owner and Susie Q. Over here. Then, as I'm literally typing up the chapter in the book, I'm four pages in trying to explain all the different exceptions we found and come up with and I'm like, now this isn't good. Like I'm confused, even re reading what I just rode. And I don't want the possibility that a gym owner is gonna be confused by this concept. So I said, you know what? Whenever possible, simplify, right. If I said you know, let's take we're just gonna literally take the whole coaches calculation out of this amount to get to real revenue were given their own bucket. Now, whether the W two are there 10 and nine, you pay percentage or combination of which you have one bucket and that your coach expense and financially fit gems range is 25 to 44% of your revenue. It goes to team member expense. If you're above 44% you need to get it below that. If you're in the 25 to 44% range, you're good there. But this way, you won't have to worry about. However you decide to pay. Your coach is on your end, but model will work now because you just know the percentage of you to stay with it.

Chris:   16:39
Wow, so you said 44% which is a very, very close to four nights. That's crazy, right? It's like I've heard that somewhere before. Anyway. That's and actually, um, you know, we get portrayed sometimes by people seeking the spotlight is like the villain for giving less than half to the coaches. Usually, this happens with people who don't understand, You know, other business expenses, but for four nights is actually the high end because you have to include, like, taxes and stuff in there, right?

John:   17:11
Ah, taxes and wearing terror and risk at Yep, there's a lot of stuff that people kind of. It's funny to like some of these gyms. I looked at the financially fit gyms to analyze. They don't use a 4/9 model. Their coaches seem happy, and they retain their coach is just fine. And guess what? Their overall percentage was around 25%. Yeah, but no one's going to them and saying, Hey, your compensation models greedy. You know, like you look longer under the certain amount and your coaches air happy and you feel like it's fair. And it is market ray like use whatever method you want, but four nights work. Stop bashing it.

Chris:   17:53
That's great, John. Thank you. So you know one of the huge epiphanies that you gave me back in June at the summit. And you know what? We always have these amazing conversations at the summit. Uh, you know, you said Chris, I'm gonna tell you help profit first gets married to founder Farmer Tinker thief and has a baby. And I said, What the hell you talking about? And then you just kind of blew me away. So, you know, I know you share this in our private group before, John, but maybe you could just kind of outline how that works through the stages of entrepreneurship.

John:   18:24
Yeah. So this is why profit first, I think, is the most amazing castle management system out there. Because it is totally tweak herbal and adjustable to where you're at as a gym owner. And, um, you had been kind enough to share your book with me before is published that I could read through that. And as I'm reading through the way you organized these different stages. First of all, I thought, this is so perfect. Like you are finally giving vocabulary to gym owners of where they're at. And so now they can communicate with each other so much more effectively in any ways off. I mean, I love, I think for me personally, it's It's my favorite book of yours, for sure. Thanks. And so you laid out like, Well, here's a founder in founder stage here. The roles that you play and here's what you need to do is like, Yes, exactly. If you're in founder stage, you can't be thinking about like, Where am I going to go on vacation? You need to be thinking about How do I get the farmer stage? That's that's the next move, which means you're coaching a lot of classes and you're probably not paying for a lot of other stuff. You're wearing all the hats, um, and so profit first, then plucks into a founder. And we say, Well, if you're coaching classes and that percentage needs to be higher than the just the format that we normally have for profit first you're going to be putting less money into equipment because if you're the founder state, you probably just started, and hopefully your equipment is gonna last at least a year. Um, you're also not gonna have a lot of profit, really, So your tax is going to be less than another gym. So we looked at all the factors you laid out and said here the percentages that we're recommending if you're in founder stage And then we moved to Farmer stage and said, Well, now your roles are different now you are bringing on people and starting to replace yourself in leveraging your money. Well, guess what? Your percentages need to be different. And we just did that with every single stage and even like, um, your thief stage where basically the gym owner can be completely removed. But, yeah, the percentages need to be different because now you're not really working in the business. Your compensation needs to be coming from the prophet account and not the owners pay account. And so we just provided different percentages for people in the different strategy so that they know exactly how this cash management system can adjust for them as their business grows. And as a crow.

Chris:   20:51
You know what's amazing, John is. When I finally realized that I was in tanker phase, I went to hire a local CFO and they were teaching me something else. Simple numbers by Greg Crabtree and they were they were talking about labor efficiency ratio, you know. So here's the Here's the bucket where here is like a salary cap, all the funds you have available to pay your staff. And I said, Okay, all right. What's this number? It's 44% like proper first, you know, being introduced to profit first when I was still in farmer phase had totally set me up for everything I needed in take her face. It was incredible. You know? It's like I finally made it to the major leagues and, oh, they put the ball on a tee here for me, okay? Oh, it's not, actually, um, so that's amazing. I mean, you know, I just want to reiterate guys like, if if you're trying to get profitable in your GM, you're trying to make more income. The very first thing that you have to do is change your mindset about how you pay yourself. My my favorite thing about Mike McCalla wits is he takes these abstract concepts and he makes them directive no profit. First is like hey yourself Exactly this much on the fifth in the 20th. Put them in an envelope, take them to a different bank, you know, sign the checks in advance like it's step by step. You know, pumpkin plan. Find your five best clients like this asking these questions, take them to coffee. You know, um and now what we've done is like, you've really You've exponentially amplified the value of that message by tailoring it to us. So thanks for doing that hard work there. You're welcome. Tell me about that process, though. I mean, as a writer, I'm crazy interested in, like, how hard is it to take somebody else's concept and tailor it to In Isha's heart is fitness.

John:   22:46
Yeah, a man I can tell you. Um I don't know. Even if after the book is published, if I'll consider myself an author Ah, I'd want to be better at it. But it is. It is a grind. You know this as well as anybody with the books. You right? There are two types of books in the world. There is the one that people convince you that you can write in a weekend, and it's really just Oh, because of notebooks giving credibility. And I you know, I'm gonna be an author, not salmon author, but we've all read those books and it's crap like he's like, Well, this 150 page book could be three pages or

Chris:   23:22
could have just been a block post. It's a good tweet,

John:   23:26
Um, and then there's the other type of book where you write it. You have a message you want to give to the world, and you feel like it will bring value to those who read it. It's a totally different focus. And obviously that's the approach I took with this book. And so as we were writing it, I mean, we're November here of 2019. I basically signed the groom with Mike November of 2018. Um, so it's been a year process for me of writing this book and putting my heart and soul into it. And yeah, I can tell you that one of the challenges was like I love Mike and I love the original system because it works for me and my firm has changed my life. But how do I tell him this just doesn't work for me? So we have. We've had a few conversations over the years. One of the big ones was the remove temptation account. I actually pulled the two brain group because of all fitness owners in the world. Your group has been the one that's helped me pioneer profit first in the industry. Thanks, man. Yeah, And so I have. We have all these gym owners who are familiar with it and are actually using it. And I asked everybody, Hey, tell me about the remove temptation account. How did you do it? What you like about it? What don't you like about it? It's like there's 506 100. I mean, there's there's a good sample size of gym owners. 22 of them bed. Yeah, I have. I used the roof temptation account, and one of those two said I do it because the book told me to do it, but I have. I don't see the benefit of it. And then everyone else was like, Now I don't do it is how we do it. So I called up Mike and Mike. Hey, um, here's where I'm coming against, Like, I can't put a chapter near where I'm saying this is required because I have 500 gems that air successfully using it, and they're saying they don't need it, Remember? Yeah, but part of acid with the discipline that comes with fitness in general, that a lot of the world doesn't have. And I just think gym owners overall, even though, you know, they need to find profitability. But in many aspects of their life, they're much more disciplined than other people. Um, so that was one of the things we're like. I don't want to offend him, but how do I So we had We went back and forth. The tax account was another one of my good man. I won't offend him. But 50% is way too high that psychotic if you have. If you literally need 15% of your revenue to pay taxes, I sure hope, um, your income, your taxable income is more than a $1,000,000. Because if it's not, you're overpaying. Those were the only clients I have that actually have to save 15%. Now, I know it's a little bit different because of the stupid, the way your business tax works in Canada

Chris:   26:17
for the even called stupid. Absolutely.

John:   26:19
Okay, yeah, But for ah, for the U. S. Yeah, 15% for the average gym owners just way too much. So it was super fun there to go back and forth and then just okay, I know this isn't working. And luckily for me, we had experience working with gym owners for last, you know, six or so years. So I at least knew where the problems were and what we needed to change. Um, but yeah, my biggest concern the whole time was how do I get the message to the gym owners without offending Mike? But Mitt Mike is the most gracious individual. And he was all for what I'm like. Yeah, it's not gonna work is like, that's not a problem. Then don't have to remove temptation to account. So in the book, I talk about how it would work, but I think I call it recommended. Not required is the subtitle for that section, and he's, like, totally great with that. Okay, cool. Thanks.

Chris:   27:20
You know, the thing that I've noticed about these great systems, John is like number one. They're usually set out to improve scalability. But the opposite is also true that you can focus down really, really hard, like into a specific use case, like, you know, the gym industry as opposed to all service industries, and it still works. You know, you're gonna change 20% but, like, the 80% is still completely valid. Yeah, and, ah, like that, I think that's a market genius. And I think that what you're doing with this system is you're making it really, really clear, simple to follow, Easy to relate to for me, a micro gym owner. And I really, you know, thank you for doing that hard work, man. Yeah, thanks. So, um, you and I I said already. You know, at our summits, we have these great talks. And so today we started recording a podcast that it actually took us 20 minutes to get up to the Welcome to the podcast, John, because we got all these little rabbit holes. But one of the things we were talking about waas taxation and letting them letting the government shoes where your money goes. One of the one of the misconceptions that you guys have with profit first is people associate profit with greed. One of the misconceptions that I have with founder Farmer Tinker thief is they think that the thief must be, you know, stealing from other people. What we're really doing is like Robin Hood redistributing wealth on our own terms. So, John, what I'd love to hear from you is kind of your philosophy, as you explain it to me an hour ago about, like, why don't we want the government to decide where our money goes and like what it supports?

John:   28:58
Oh, why, why wouldn't we? Well, I mean, the first thing that comes to mind. Uh, yeah. Almost every single politician runs on a some sort of campaign where they're touting a tax benefit that they're going to give to people. And I think what the world needs to realize is you have to see through that marketing pitch. Um, they're really trying to buy boats with tax benefits. And so, in the US do they call him entitlement programs in Canada as well?

Chris:   29:38
I'm gonna start calling them that. Yeah, Usually it's ah, slightly more derogatory term.

John:   29:43
Okay, um, in the US, we call them entitlement programs, which, if you look at the word entitlement, um, there's not a lot of positive emotion to come around that word or good behaviors that come around that word. And so we have Ah, hole gigantic percentage of people who are entitled and just feel like, Well, this is something I deserve or entitled, not even deserve that I'm entitled to receive this benefit. And most of that comes from tax. We, uh, fun 55 or six years ago. We have these videos on our website. We did a study. There was, ah, a senator and I can't remember his name. I wish I did. So I'm not I don't want to take credit for this, but this senator did it every year. He came out with a report of, like, money, basically money. You have no idea was getting spent by the government on whatever. Oh, no. And so we did. We took his report, and we created just this video with graphics like, Did you know the government spend X amount of, like a ridiculous amount of money studying seahorses in the ocean to see if they could change the currents? Um, did you know that they spent millions of dollars trying to create a real life iron man suit? You know, did you know they spend $30 million a year just storing paper? We just like all these different reports So you think about that? That's taxpayer money. Like if you the way you translate that to you as a gym owner. As you say, the food that I put on the table, the house that I can afford my members pay for that. Everything is paid for by my members. The space of the facility, the quality equipment and everything in my life, the quality of my life the members pay for. Well, guess what? We're the members of our country, right? Um, and we pay for everything that the government's doing everything. We're funding everything through our tax dollars. And so I think about things like that. And I'm like, I don't really I don't want my money to go towards studying seahorses. One of them, like they paid some guy to watch grass grow. I don't know what the study was, but that's what he did. You just watch the grass grow. It was gonna grow that fast. I don't want my money to go for that because I feel like I could probably leave a better legacy in life, especially think about our noble purposes. Gym owners. I can improve the health of the people in my circle. And if the more resource I have to do that, the more cash available for me to spend doing that, the better benefit to the world and to my economy. And so because of that, we've really I want you to pay the least amount of taxes possible. I don't care what country you're in. Pay the least amount of tax as possible because you will always spend your money better and do more good in the world than the government can ever do with your money.

Chris:   32:57
Okay, that's that's amazing. That's even better than what I hope for, John. So we're actually gonna wrap up on that note, But I want you to call people like where and when they can get your book. And, uh, yeah, let's start with that

John:   33:10
Cool s o. The book will be published January 7th. It is available for preorder right now. Um, you can Google profit first for Micro Jim's, or you can go to Amazon and type in profit first for Micro Jim's. We also have a website profit first for micro jim's dot com. Um, check us out there on, obviously, at the closer we get If you're a gym owner. I hope I found all the avenues to find you and you'll be bombarded with messages that you should buy

Chris:   33:39
the book. We're gonna We're gonna preorder 20 copies if we haven't already off the check and give them out to people in the gross stage to brain. But if you don't get one of these free 20 copies, then you should be worrying yourself. We'll have a link in the show notes here, John. Thanks a lot, man. I mean, I know there are so many topics that we could go on to, like Contract Subcontractors versus two and the changing laws there. But I really appreciate you doing this hard work to make the lives of gym owners easier.

John:   34:09
Yeah. Thank you. I appreciate it's my pleasure to serve.

Chris:   34:12
Thank you for listening to this special edition of two brain radio. Don't forget to subscribe. Leave us aerating or write a review. We'd love to hear your thanks. And if you're inspired to take action today but need some guidance, head over to brain business dot com to book a free call with a mental