TEB Book Review: Profit First

If you have not read Profit First by Mike Michalowicz, then stop reading right now and don’t come back until you have clicked on the link below and bought the book. Go ahead, I’ll wait.

This is a book that EVERY entrepreneur needs to read and implement.

Why would I make such a bold statement? What Mike lays out in this book is a proven methodology that guarantees you will be profitable as soon as you start. This profit is on top of your owner’s compensation! Now that is something to jump up and high-five yourself about!!

Here are my Top 5 Takeaways:

1. Profitability is the path to all your strategic goals.

• Do you want to expand? Profitability ensures that your expansion is sustainable.
• Do you want to provide a stable environment for your hard-working staff? Nothing says stability like cash in the bank.
• Do you want to sell your business and then go buy and island? Profitability will allow you to buy the island and then work remotely.

2. The journey to your profitability goals does not happen overnight, but it is possible to achieve them. It may be a tough journey filled with difficult choices and delayed gratification, but it is possible. You just have to move forward, always forward.

3. You will be surprised, shocked and dismayed when you take a hard look at what you are spending money on. This is especially true when you have the lightbulb moment that every penny you spend on expenses that does not generate profit is stolen right out of your pocket. Some entrepreneurs I know could be world champions self-pickpockets.

4. The Power of Parkinson’s Law (The demand for something expands to match it’s supply). As every entrepreneur begins their profitability journey, they pay their future (profit account), themselves (owners’ compensation account), the government (tax account), and only then everyone else (operating expense account). Parkinson’s Law dictates that when you shrink the supply of cash that can be consumed by operating expenses, the operating expense demand will decrease. This may require some tough analysis and decisions. But remember that the goal is profitability, which leads to stability, which leads to achieving your strategic objectives.

5. Profit First can be applied to every company, in every industry of every size and complexity. While understanding the concept and core principles is very easy to grasp, the implementation and execution may be difficult. If you have any questions, concerns, or trouble, that’s ok. There is a team of accountants, bookkeepers, and coaches that are hand selected and certified to help entrepreneurs implement the Profit First way of living. You can find them at http://www.profitfirstprofessionals.com.

I would like to share two stories that have convinced me that I need to share this book with every entrepreneur I meet.

I have a friend that has always worked for himself. He has founded, grown, and sold more than one business and currently owns three. After reading Profit First, he talked to his business partner, who had not read it. The business partner was skeptical and thought that it would be too much work to cut out any expenses. After all, in his mind, they were lean and efficient. However, if my friend did all the work, then his partner was ok with it. After only three hours of work, my friend was able to find and eliminate 10% of their annual expenses. That seemed like a pretty good investment of time and energy. Three hours for 10% more profit! Where do I sign up?

I have been sharing this concept with all my clients and prospects and one of them said to me, “Greg, I don’t believe this will work for my business; it is too complex. But, boy do I need this. I am tired of feeling excited when I see all the sales ($8,000,000+ per year) roll in, and then depressed when I look at my bank account and see most of that roll back out. I feel that I am scraping by every single week. I need this!” What makes this story so incredible is that I just lent this client $2,000,000 to help him acquire another company and expand to a new territory. In my role as his banker, I thoroughly examined his company and concluded that this is a very financially strong company. But the owner does not see his business this way. He is most concerned about cash and profit. We then decided to start implementing Profit First immediately.

Today’s entrepreneur deserves a banker that is passionate about helping them achieve their goals and a banking relationship that is a strategic competitive advantage. Hit the connect button on LinkedIn and tell me what your profit margin is. Not your net income margin, your PROFIT margin.

Greg Martin is an entrepreneur’s insider to the banking industry and passionately believes that every person was uniquely designed for a higher purpose and calling. Greg guides entrepreneurs in defining and achieving their purpose and calling. His deepest passion is living life with his wife of 17 years and their wonderful son.