Mike Michalowicz’s background is as a serial entrepreneur who has succeeded more than he has failed. The inspiration for ‘Profit First’; however, came from his most painful moment as a business owner when his young daughter offered him her piggy bank as bail out.
‘Profit First‘ is written to address the vicious cycle that many business owners go through while managing the cash flow of their business. They do this by doing what he calls “bank balance accounting”, riding waves of euphoria and anxiety as bank balances rise and fall. Owners end up managing their business not on facts but on the emotion of the time. Michalwicz asserts that there is a better way.
In ‘Profit First’, Michalowicz turns to a number of different personal finance tools to develop what could be a very sound approach for many business owners. He bases is all on identifying a baseline profit that gets carved out of revenues first before anything else, very much like the adage of “pay yourself first”. He diligently walks the reader through a process to carve out additional accounts for owner’s pay, taxes and operating expenses. The order listed is the order that he mandates that they need to be addressed. Only after you have covered everything else can a business owner know what the operating expenses can be. Michalowicz firmly states that if you don’t make sure that you get paid and have a profit, then a business isn’t a business. I agree!
In the book Michalowicz covers tools to get you started and gives you access to his website for additional resources. I found that one of the most compelling items was that at the end of each chapter he provided the reader with easy to act on actions steps.
In summary, ‘Profit First’ is thought provoking and provides a compelling and easy path with which to take action today. The system, especially the advanced method can be a bit overwhelming, but fortunately the business owner can scale it to their own tastes, and as long as the core is adhered to ‘Profit First’ is a great way to maximize the probability that your business makes you money.
The Shared Finance Center provides outsourced accounting, bookkeeping and fractional CFO support to small business owners and in doing so we heavily focus on maximizing cash flow. We are headquartered in Roswell, Georgia and work with clients across the United States. If you think that this post would be helpful to anyone you know, please pass it along. Also please follow our blog for regular tips to grow your business.