Profit First book – A short review

In this blog post, we give a short review of the Profit First book, by Mike Michalowicz. We also discuss the Profit First formula. 

Profit First, by Mike Michalowicz

“Transform Your Business from a Cash-Eating Monster to a Money-Making Machine”

Profit First, just as the name implies, is your guide to a different way to manage your business finances, and even to completely transform a business, so that the company’s profit is no longer a deadly concern.

This book is a simple, clear guide to effective financial management methods.

The formula for success described in the Profit First book is amazing precisely because it uses accounting principles that everyone knows, to change the way you run your business.

Thus: from revenue – expenses = profit to revenue – profit = expenses.

This system is explained in detail in the Profit First book, and the author provides clear and simple examples of how to implement this formula so that you have great financial success over time.

The author also points out that we often make bad decisions because of our biases and psychology, such as because of temptations.

In Profit First book you will learn how to neutralize temptations and how to make wise financial decisions.

This is a must-read for entrepreneurs or for those who want to become entrepreneurs.

Some notable points from the Profit First book

Profit is a core element for your business. You must understand how profit works in order to achieve your business goals. 

– The lack of profitability is the recipe for failure. Profit does not always equal revenue.  

Focus on creating new healthy habits and improving your work environment rather than dwelling on bad habits.

4 Tips for dieting and finance: “Use small plates (redistribute money to other accounts), serve sequentially (allocate based on percentages to accounts in order), remove temptation (move your profit and other tempting accounts out of arm’s reach and make it hard to access them) and enforce a rhythm (do your allocations twice a month, on the 10th and the 25th of the month works well).”

Parkinson’s Law applies to your cash as in when you have access to them – you’ll use it when you don’t – you won’t. By confining access and permeability of your cash, you’ll blow less money, simple as that.

– Take into consideration the primacy effect. This means that whatever we see, touch, smell, hear of first – the higher the chance we are going to buy it. 

– When you will start to focus on your profit, other issues may surface. This is a great opportunity to see what you can fix, change, or get rid off. 

Sales – profit = expenses.

–  The Profit First model: The author recommends to set up five financial accounts. 

  1. Income
  2. Owner’s pay
  3. Operating expenses
  4. Profit
  5. Taxes. 

Decide target designation rates dependent on a moment appraisal, yet start moderate (1% at usage).

From here all receipts from deals go into the paid account and on the tenth and 25th of every month, you’ll spread the cash into different records according to your designation rates.

At that point, dispense pay rates from the proprietor’s take care of record and cover bills from the working costs account.

Toward the beginning/finish of each quarter take half of the cash from the benefit account as benefit conveyance.

To upgrade this framework, set up the benefit and duties accounts with a different bank.

  • Regardless of what the number is, on the off chance that you progress in the direction of it and trust it is possible, you will accomplish it and even blow past it.
  • You can get great insight about similar businesses on 
  • Your salary matter too, and cutting it won’t make a difference long term. Focus on efficiency. 
  • Your organization should hold your own personal expense obligation and afterwards pay it. Your business should pay your taxes. 
  • You can figure out what owner’s compensation your business can bear the cost of by taking a gander at your most minimal three months and drawing a sensible rate from that. 

– A definitive in development is to separate more profit by more affordable assets

– It’s more intelligent to burrow a well than to attempt to make it downpour. 

– Each business ought to have a multi-month cash reserve (three to four months). 

–  Want to know how many employers you can have? For each full-time employee, your company should generate real revenue of $150,000.

Try not to extend your way of life in light of more money available. You have to have more money. Lock in your lifestyle so you can achieve financial freedom in the long run.

The 5 steps to help lock in your lifestyle:

  1. Always look for a free option
  1.  Never buy new if you get the same benefit as used.
  1.  Never pay full price.
  1. Negotiate and seek alternatives first.
  1. Delay major purchases until you’ve written down 10 alternatives.

The Profit First formula

The Profit First Formula is simple and many of you may know it already:  Sales – Profit = Expenses.

You may think about what improvement this truly makes—isn’t it just semantics? Sort of.

Be that as it may, what Michalowicz is attempting to tell is more mental than anything: you need to move toward your business thinking profit first, not profit last.

The goal of the Profit First Formula is to build up a framework for building your business in a maintainable manner that makes long haul achievement.

Initially, represent your profit, charges and your own taxes, and afterwards what’s leftover is the thing that the organization needs to spend on everything else.

We, for the most part, consider costs (e.g., cost of material, lease, pay rates, utilities) as unavoidable, when they can quite be disposed of, stayed away from, or deferred.

At the point when you teach yourself to save a level of income for the benefit and just spend what’s left to cover your costs, you’re driving yourself to spend all the more carefully. 

Doing that can be hard.

It may mean you need to defer a portion of your spending on development for the time being, in any event, when you need to continue pushing forward. 

Yet, it likewise implies that whenever you do experience an extraordinary chance to develop your income and profit, you’ll have the assets to put resources into it without jeopardizing your business.

On the off chance that you put each extra dollar once more into your business, you may believe you’re planting seeds for development—yet you’re really putting yourself in danger for a future emergency.

How to implement the Profit First formula?

How to implement the Profit First formula? Create smaller spending buckets!

The initial step you have to take is to get progressively granular with how you distribute your money by making smaller spending buckets.

To make this simpler, you’ll have to set up a bank account dependent on the central elements of your business:

  • Income/revenue account
  • Profit account
  • Operating expenses account
  • Owner’s pay account
  • Tax account

Furthermore, you might need a few other bank accounts depending on your business and the goals you want to achieve.

You can learn more about how to use the Profit First Accounting System by Mike Michalowicz here

Who is Mike Michalowicz?

Mike Michalowicz, the author of the Proft First book,  is the CEO of Provendus Group, a consulting firm that ignites explosive growth in companies that have plateaued. 

Mike started his business at the age of 24 that now is a multi-million dollar business. Michalowicz did it again, and again.

It is fair to say that he has the knowledge of how to develop a business. 

According to his official website, Mike Michalowicz e is also the creator of Clockwork, a powerful method to make any business run on automatic.

And his latest, arguably most impactful discovery, is Fix This Next. 

In Fix This Next, Mike details the strategy businesses can use to determine what to do, in what order, to ensure healthy, fast, permanent growth (and avoid debilitating distractions).

To learn more about Mike and get access to a treasure trove of entrepreneurial tips, visit


Profit First book is a simple, clear guide to effective financial management methods.

This is your guide to a different way to manage your business finances, and even to completely transform a business, so that the company’s profit is no longer a deadly concern.

Did you read the Profit First book? We’d love to know what did you think about the Profit First formula!

Don’t hesitate to leave a comment on the content. 

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