Sales – Profit = Expenses
Take a look at that equation again. It’s a bit different than what many financial books will teach you about how to run your business – and that’s why Profit First is a major game-changer.
You’re probably reading this because you have a small business or you’re eager to start one. No matter how you slice it, if you’re not making money, you’re not in business.
Have you heard horror stories about entrepreneurs who sink all their money into their business, but never take an income for themselves?
Guess what – it’s true! Thousands of entrepreneurs do this from day one + never manage to find a way to pay themselves.
What’s the point in having a business if it doesn’t pay you?
Start Putting Profit First
My first thought was, “hooray, another financial book that will use big words + won’t help me for sh*t.” As Jessica + Marilyn told me more about Mike’s uber-simple accounting concept of working with our natural habits to earn more + save more, it wasn’t long before I bought a copy of the book.
Plus, it’s hard to argue with 235 5-star reviews on Amazon. For real.
“Instead of being the world’s best at one thing, mastering the process of delivery perfectly and super-efficiently, we end up doing a greater variety of things and become less and less efficient at each step, while our businesses become more and more costly to run.” – Profit First by Mike Michalowicz
My own business has had 5+ incarnations over the past decade, but none were exceptionally profitable … until now. I began using Mike’s Profit First plan last year + not only have I seen a profit each month, I also pay myself a salary each month.
Income AND Business Growth
How do you actually earn an income from your business and grow your business at the same time?
Memorize Mike’s equation: Sales – Profit = Expenses
Earn more, take a cut for yourself (because you earned it!), then use what’s left over to invest back in your business.
“You gotta spend money to make money,” … but only if you have that money to spend. And you won’t know what you have to spend if you don’t keep track of it.
I don’t care if you’re using an Excel spreadsheet (that’s what I used for years), but you need one place to see all the money coming in + going out of your business.
The numbers don’t lie. Every day, you should be able to quickly know how much money you can spend, what is owned to you, + if anyone is late to pay you.
How Healthy is Your Business?
If you spend one more second worrying about the size of your business while compromising a strong bottom line, your business is unhealthy at best. Are you eating first, or are you surviving on leftovers, or worse – scraps from the garbage can in the alley?” – Profit First by Mike Michalowicz
You + I both started a business for the same 2 reasons:
- To help people
- To earn a comfortable living financially with more free time
To achieve those 2 goals, you need to be able to pay your own bills, eliminate debt, + invest in your business wisely.
Total disclosure: until recently, I had $40,000+ in debt. Credit card, car loan, student loans – you name it, I had to pay it. It’s very hard to focus on your business + deliver the best value when you’re constantly worrying about that debt.
Mike’s easy-to-implement Profit First method has helped me cut that debt nearly in half in less than 2 years while growing my business at the same time.
No gimmick, no huge investment – simply a book with straightforward action steps + tough love.
Small actions, finding the most efficient / affordable way to do business, + having intimate knowledge of your numbers at all times – that’s what Mike teaches + it’s changed my entire financial life (the facts above speak for themselves).
My goal for 2016 is to, for the first time in my adult life, have zero debt. My business, run with the Profit First method, is going to make that happen.
… if you want true financial freedom, you will have to let go of your preconceived notions about what you “need” and start placing a higher value on financial independence than you do on your stuff. It’s not rocket science. And it won’t kill you. Promise.” – Profit First by Mike Michalowicz
The Profit First Life
I haven’t gone into great detail on how the Profit First method works + that’s intentional.
Mike explains it far better than I ever could.
I’ve read 30+ financial books in my life, and this is the first + only one that has made deep sense to me.
Your vital equation is: Sales – Profit = Expenses. Pick up or download a copy of Profit First for yourself to learn how to implement it in your business.
Financial freedom is a real thing + I want you to experience it like I am 🙂
What Do You Think?
Are you earning an income from your business?
COMMENT below + let me know if your business is supporting you (+ share this post with your fellow entrepreneurs!)