Occasionally you find something that feels revolutionary. Something that changes your perspective and opens your eyes to new possibilities. Profit First proved to be one of those experiences for me.
Accounting has been done a certain way for a very long time, the basis of such is a simple formula:
sales – expenses = profit.
Anyone who has been in business for any length of time knows this basic equation. However, in his book Profit First, Mike Michalowicz flips this equation so that sales – profit = expenses. Don’t miss the significance of this.
This new way of thinking puts profits first instead of last as it typically has been done.
If this has your attention, keep reading. I’m going to share three reasons why Profit First should be at the top of your reading list.
1. It just makes sense.
Mike Michalowicz understands business. He has experienced tremendous successes, lost it all, and then built it back. One of the key things he learned is that there is a better way to manage profits and expenses. In the Profit First framework, profit is put first, literally. The traditional model of accounting leaves profits at the mercy of everything else. Which leaves most businesses operating from check to check because there’s usually very little profit left over. But with Profit First, your business profits are given priority. Using a clearly-defined system can lead you to experience true profit growth and greater control over your business. The Profit First system is based on how the human brain works, not how an accountant’s brain works.
2. It works.
By putting your profit first and deciding what you want it to be, you are then challenged to make your expenses fit into a certain budget. This is based on Parkinson’s law, which essentially states that demand expands to match the supply; in other words, expenses will often match however much money is available to pay them. In doing so, you take a much more proactive stance in managing your profits rather than simply reacting to whatever is left over.
Profit First is also based on using multiple bank accounts, each for a very specific purpose. Most business owners manage their finances based on their account balance. Rather than trying to retrain business owners, Profit First uses that natural tendency to help owners do a much better job of managing their finances so that profits grow rather than disappear.
3. You don’t have to be an accountant to do it.
Michalowicz does a great job of outlining a system for business owners to follow. He provides a number of resources on his website to help you implement and execute the Profit First system. Additionally, he developed a network of accounting firms, like ours, who are certified to help business owners implement the Profit First program.
A free gift to help you get started.
We love to see and help business owners succeed and kick butt. If you generate greater profits in your business, that gives you greater control over your business and your life. So to help you get started, we are going to give you the core chapters of Profit First for free. Simply click on this link, and fill out the brief form to get the PDF.
I hope you find this is helpful for your business as I have found it for mine. Get in touch with us if you have any questions.