Fix This Next

“Fix your biggest business problem first, and you unlock the pathway to sustainable growth.”

1. Relying on Gut Instinct Leads to Crisis Mode

Relying solely on gut feelings to solve business problems can leave you trapped in endless crises. Many business owners believe their instincts will guide them to the right decisions. However, instincts often prioritize immediate reactions rather than addressing the root cause of the issue.

Mike Michalowicz recounts how he once struggled to pull his own business out of debt. He followed his gut, assuming increased sales would solve his financial troubles. Yet, even with rising sales, his debt grew worse. By focusing on the wrong problem, he wasted time and resources on ineffective solutions.

When faced with a simple situation like a jammed printer, he saw the parallel. Instead of applying force and frustration, stepping back and observing helped him pinpoint an overlooked issue: a tiny scrap of paper jamming the machine. This showed him the importance of strategy and clearheaded problem-solving.

Examples

• Mike’s initial focus on scaling sales worsened his company’s debt.
• The printer metaphor highlighted how brute force doesn’t solve every issue.
• Entrepreneurs often misdirect energy toward apparent problems instead of root causes.

2. Businesses Have a Hierarchy of Needs

Business operations rely on a structured hierarchy similar to Maslow’s human needs, where foundational layers must first be stabilized. Without progression from one layer to the next, businesses fail to grow sustainably.

The Business Hierarchy of Needs starts with Sales, representing consistent income. Profit comes next, ensuring stability. After Profit is Order, emphasizing systemized operations. Impact follows, focusing on meaningful experiences for clients and employees. Finally, Legacy tops the pyramid, helping businesses thrive independently of their founders.

Understanding this hierarchy sets a framework for consistent growth. Just like humans can’t focus on self-fulfillment while starving, businesses must address lower levels (like cash flow) before aiming for cultural impact.

Examples

• Sales equate to cash for survival, like food for human existence.
• Profit acts as a safety net, akin to physical safety in Maslow's hierarchy.
• Legacy, as seen in companies like Netflix, supports a business’s existence beyond its founder.

3. Identify and Fix the Weakest Link

Attempting to fix every issue at once is ineffective and overwhelming. Instead, businesses must locate and fortify their weakest link to keep the whole structure functioning.

Michalowicz compares this to tug-of-war with a chain: the entire chain fails if its weakest link breaks. In business, this weakest link is referred to as the "Vital Need"—the most pressing issue in the hierarchy. Addressing this need gives businesses room to grow.

An easy assessment process using the Business Hierarchy of Needs can help identify the Vital Need. Once pinpointed, businesses focus their energy on solving it.

Examples

• A company in debt focusing only on generating profit may overlook low sales as the root problem.
• McDonald’s excels because its processes ensure each link—from staff training to customer service—is strong.
• Overworking without resolving foundational problems leads to inefficiencies, like Michalowicz initially experienced.

4. Strong Sales Are the Bedrock of a Healthy Business

Consistent and sufficient cash flow is fundamental for any business. Without it, companies risk collapse as they can’t sustain operational costs, innovation, or employee retention.

Michalowicz learned the importance of managing Sales as foundational during his early business failures. Promising more than he could deliver to secure clients resulted in financial loss, almost leading to lawsuits. Sales are not just about volume but about ensuring promises match capacity.

Clear payment processes and realistic promises also help build trust. Businesses sustain themselves by generating enough income to also pay the entrepreneur’s personal needs.

Examples

• Michalowicz’s failure to deliver on a phone system contract taught the importance of realistic promises.
• Boonton Coffee prioritizes positive experiences, ensuring steady customer sales.
• Companies like PayPal implement clear payment systems to ensure all money owed is collected.

5. Profit Is a Reward, Not Leftovers

To achieve lasting stability, businesses must reframe profit as a planned goal rather than an afterthought. Owners are often tempted to reinvest all revenue back into operations, leading to a cycle where profitability is always out of reach.

True profit is what you can withdraw from your business and use personally, akin to a shareholder receiving dividends. Setting aside specific portions of income first guarantees profit accumulation, which safeguards businesses against debt and economic downturns.

Michalowicz suggests calculating a fixed percentage for profit before addressing other expenses. This ensures consistent financial growth while also pushing businesses to streamline operations or raise pricing.

Examples

• Setting aside 10% of sales revenue toward savings guarantees a buffer for emergencies.
• Apple’s financial strategies emphasize profits to fund innovations without debt.
• Correctly budgeting profits saved Michalowicz from bankruptcy, allowing for debt repayment.

6. Systems Create Autonomy and Efficiency

Autonomy in operations allows businesses to function smoothly, even without constant oversight from their leaders. Having documented, repeatable systems ensures vital tasks are accomplished effectively by anyone on the team.

McDonald’s showcases perfect systemic function, where anything from assembling a burger to customer service runs efficiently, regardless of management’s presence. Systems boost consistency and prevent bottlenecks when staff are unavailable.

Michalowicz advocates that each employee document the steps for their daily responsibilities. When workers can seamlessly substitute for one another by following procedures, workflows stay consistent.

Examples

• Documenting an invoicing process prevents delays caused by employee absences.
• Standardized operations in franchises like McDonald’s keep services seamless across locations.
• A business owner who delegates tasks avoids burnout and achieves work-life balance.

7. Impact Moves Businesses Beyond Transactions

Progress means shifting your business from merely selling products to delivering deeply meaningful experiences. This shift turns transactions into transformations, fostering loyalty and passion among both employees and clients.

For example, Lost Kitchen restaurant personalizes customer bookings using postcards, creating unique connections before diners even arrive. Such meaningful efforts motivate employees and delight customers, building lasting relationships.

Transformative impact strengthens a company’s brand. Client and employee loyalty rise when they view the brand as valuable beyond financial transactions.

Examples

• Lost Kitchen uses its unique postcard system to create community bonds with diners.
• Starbucks emphasizes customer experiences, from friendly baristas to cozy atmospheres.
• A barista’s friendly gesture turned Michalowicz’s coffee run into a memorable example of care.

8. Legacy Outlives the Leaders

Legacy allows a business to continue thriving after its founder steps aside. This requires embedding core values into every layer of operations, ensuring those values continue guiding decisions as times change.

Netflix serves as an example here: once built on DVD rentals, it adapted to streaming and became a cultural phenomenon. Businesses must develop flexibility to survive evolving technologies and trends.

Loyalty from customers and leaders ensures the brand lives longer than its creators. By anchoring in community impact and clarity of vision, businesses gain enduring support.

Examples

• Netflix evolved remarkably, retaining strong customer loyalty over decades.
• Local brands serving communities tie their legacy to ongoing goodwill.
• Michalowicz emphasizes evaluating values quarterly to ensure continuity.

9. Strategic Planning Prevents Survival Trap Cycles

Randomly addressing problems as they arise puts businesses into Survival Trap cycles. Instead, clear strategies built on the Business Hierarchy of Needs steer businesses toward long-term goals.

Michalowicz’s Fix This Next method offers a framework of questions and objectives to gauge progress. By consistently applying these steps, owners can focus energy on the right priorities.

This systematic approach prevents business owners from relapsing into firefighting mode, freeing them for growth.

Examples

• Fix This Next helps pinpoint foundational needs blocking growth.
• Planned quarterly reviews realign businesses with long-term objectives.
• Entrepreneurs become more decisive by addressing weaker links systematically.

Takeaways

1. Apply the OMEN method to ensure measurable solutions: define an Objective, Measure progress, Evaluate regularly, and Nurture changes.
2. Start each quarter by identifying one Vital Need in your Business Hierarchy and focus your efforts on resolving it first.
3. Document and simplify workflows for all major processes, enabling employees to work independently.