Profit First by Mike Michalowicz is a small business classic. Mike preaches that you should take profit first – that you as a business owner, and IF you ever had share-holders, should expect profit – and the business will run better because of this process. It will be healthier, because it will be formed on the premise that profit is important.
Profit First Summary:
- You should identify where you’re at with your profit, owner’s draw, operating expenses, and taxes.
- Create separate accounts with clear names like OP EX 65% (TAP 51%) – the first percentage being where you’re current allocating money, and the TAP being the ‘Target Allocated Percentage’
- Each quarter – move 4% out of Op Ex and add 1% to each of the other accounts.
- This will create a squeeze – since you’re use to operating at 65% and operating on 61% of revenue will feel tight. This is a good squeeze according to Mike – it’s like when you can make a tiny travel sized version of toothpaste last for a month if you have to, and you become lest wasteful and conserve more as appropriate.
Profit First Review:
This is one of those books that I wanted to get out and try right away – even though I generally pride myself on taking things with a grain of salt and moving slowly. The reason it’s so tempting to just go for it now, is that he leaves these ‘call-to-actions’ throughout the book that push you to want to go for it now.
So my review is partly this way because I took action on the Profit First system, and am now implementing it in my small business:
- The system is difficult. It’s easier sometimes to just spend as much as you want on your business while your building it. The problem is that I was likely building out areas of the business that wouldn’t serve me long-term because they were low-profit, or no-profit – so they need to be trimmed or cut for the long-term health of the business.
- The book has a lot of urgency in it, and I really appreciate the little call to actions and and emphasis placed on action.
- The book is well-written and Mike does a really good job of entertaining along the way.
*The Audible version is awesome – as Mike reads it and I really appreciate his playful and interesting approach in the reading:
- I might suggest re-reading this a couple times, and I have started my second reading.
- Spend some time with this one, and get ready to write along the way.
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