Profit First

 Life is full of action. Does Profit First accumulate dust on your shelves? Instead, choose your most important idea now.

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 Outline

Profit First provides readers with a new accounting perspective: Mike Michalowicz recommends calculating expenses based on the difference between sales and profits, rather than calculating profits based on the difference between sales and expenses. Mike developed this idea from the most effective weight loss strategy: Use smaller plates to limit parts. Mike Michalowicz's system is designed to make business people feel like money monsters and money cows.

Mike Michalowicz Perspective

Mike Michalowicz is a former small business columnist for the Wall Street Journal. He also worked as a makeup expert at MSNBC. Mike is now a popular keynote speaker on innovative business topics. He is also the author of several books: Fix This Next, Clockwork, Surge, The Pumpkin Plan, and The Toilet Paper Entrepreneur.

Money Problems Are Tied to Sales Speed

Mike explained at the beginning of the book that funding problems arise when one of two things happens:

1. Sales slowdown-There are obvious problems with sales slowdown. First, you can make paying costs and employees more difficult. Climbing has also become more difficult for your company.

2. Sales speed up People tend to think that increasing sales quickly is good; however, there are problems related to accelerating sales; as your income increases, your expenses will also increase. In addition, the company will start spending money. After strong sales growth. However, the reality is that the drought will come just as fast. Therefore, if your expenses also increase, then your cash flow may have a major gap.

 

Therefore, Mike believes that the ideal size of your business grows naturally. Don't try to force development by drastically increasing costs after sales increase. Instead, secure your income first, and then increase them. Determine what will help you. Make a profit and get rid of unprofitable things. Focusing on growth will force you to do your best to achieve growth. Focusing on profits will help your company develop stability, sound, and longevity.

 

 

The Core Principles of Profit First 

“The old, been-around-forever, the profitless formula is: Sales – Expenses = Profit The new, Profit First Formula is: Sales – Profit = Expenses The math in both formulas is the same. Logically, nothing has changed. But Profit First speaks to human behavior—it accounts for the regular Joes of the world, like me.” – Mike Michalowicz

Mike outlines several core principles of putting profit first:

• When you have fewer funds to run your business, you will find ways to get the same or better results at a lower cost. When you first make a profit, your thinking will be smarter and more innovative.
• Handle your business carefully and awkwardly. Basically, starting today, you should tell yourself that you will benefit from immediate access. Mike explained that if you don't see your winnings, you will not get your winnings and you will waste them.
• If you become a leader in your field, your business will grow faster than you can imagine. Therefore, Mike invites you to first determine your strongest ability and improve it significantly.
• New and simple billing formula. The system is based on a profit-oriented system: SalesProfit = Expenses.
• Eliminating unnecessary expenses will help your business to the greatest extent.
• Create a separate bank account called "profit" and deposit 1% of each standard deposit in your checking account into your "profit" account.

Setting Up Profit First For Your Business

Mike has proposed the idea of ​​a separate account called "Profit". However, Mike recommends that you open five checking accounts when starting a business:

• Income
• Profit
• Owner’s Comp
• Tax 
• Opex

Allocation Percentages

“Working on your business is about building systems. Period. An entrepreneur is someone who finds the solutions to opportunities and problems and then builds systems to consistently deliver those solutions through other people or things.” – Mike Michalowicz

In addition to opening certain accounts, it is also important to understand how to distribute profits correctly. Mike explained that you decide which numbers are meaningful to you and your company. How to decide where to send money.

Putting Profit First Into Motion 

Mike described two main ways of profiting: In particular, you need to increase sales or reduce costs; sales increase is possible, but it takes time; in contrast, cutting costs is usually a quick and simple process.

Destroy Your Debt 

This is very useful for improving your bottom line, but if your business is still heavily in debt, you may not get many benefits from that bottom line. Mike described the debt as the biggest obstacle to profit. Try to minimize them first. Never go into debt and make financial decisions based on your best monthly income. If you do this, you will quickly run out of funds and begin to accumulate debt. Making decisions based on your best monthly income will motivate you to survive, not to thrive.

 

Find Money Within Your Business 

Mike provides a broad destination for readers. He wants you to check all aspects of the business and make changes to help him get twice the result with half the effort. However, Mike provides many tips to help you make more money in your business.

The Advanced Techniques

As a foundation, Mike indicates that your enterprise ought to be producing actual sales of 150,000-250,000 greenbacks in line with full-time employees. However, many extra superior strategies ought to additionally be followed to begin placing Profit First.

The Profit First Life

Mike outlines five primary rules to help you stay in the Profit First lifestyle for the next five years:

• Always start by looking for a free option
• Never buy new when you can buy something equally good that is used
• Never pay full price if you can avoid it
• Negotiate and seek alternatives first
• Delay major purchases until you have written down ten alternatives to making the purchase and have thought through each one
• Save your spending for your Profit First quarterly dividends

You should only gradually upgrade your lifestyle as your income increases. Mike calls this the Wedge. Also, every time your income increases, you should set aside half of the increase as savings.