Quick: what is the fastest way to increase profits in your business?
If you immediately thought "Sell more work," or "Get more clients," then I'm about to tell you exactly why you should read Profit First.
Do you have any of these problems:
- Unplanned Accounting: "We figure out our financials as we go. It's how we've always done it."
- Process Schmocess: "No, I don't have an accounting process. I’m too busy trying to sell more work to worry about bank accounts."
- Revenue without Profit: "Yes, we are growing, but there is never enough MONEY!"
If any of these sound like you, Mike Michalowicz' book, Profit First, will change the way you run your business.
More to the point, Profit First will fix the one huge, painful, glaring problem that affects 99% of service businesses out there: Money.
The Number One Problem that Profit First Will Fix in Your Business
The problem is always money.
In the off-season, it's hard to find. No matter how many cleaning specials or fertilization packages you sell, you can't get the revenue your company needs in the off-season.
But what about when you’re up to your neck in extra jobs and extra clients? Even then, the money seems to slip through your fingers. When you have it, something always comes up:
- Your oldest truck breaks down and you have to get a new one.
- Two of your crew members quit in the same week.
- You lose that really profitable residential account, and suddenly you’re scrambling to make ends meet while you figure out what to do next.
But what if you were always ready for any financial emergency? What if you could always guarantee that your business was profitable?
It is possible. It might even be easier than you think.
How Profit First Will Help You Solve Your Financial Woes and Worries
Mike is a lifelong entrepreneur and he has built his career on growing businesses from the ground up. He tends to learn his lessons the hard way, but along his journey, Mike has helped thousands of budding entrepreneurs get through their roughest, darkest times.
In Profit First, Mike shares this jaw-dropping story about one of his friends who seemed to be running a moderately successful business:
“I was having dinner with my friend Rodrigo when he told me how his business generated $350,000 in annual revenue, but he was living on below-minimum wage.”
Maybe your situation isn’t this desperate. Maybe you're making well above minimum wage. But if that passage hit too close to home, if that passage made you feel the tiniest bit of worry, consider it a good thing; this book could be the beginning of your success story.
Profit First is Mike Michalowicz' third book. As an entrepreneur, Mike will be the first to admit that he has flirted with failure on too many occasions. For years, he has built businesses, crashed them into the ground, and cleaned up the remains.
Only recently did he figure out how to be successful. Hint: there is no one “secret” to success. There are thousands. Mike had to accumulate this knowledge through thousands of hours of hard work and trial and error.
Profit First is his fool-proof guide to understanding your business’s financials. Reading this book is an eye-opening experience, filled with sharp logical thinking designed to help you protect your business.
Sometimes, Mike's logic is so sharp, it hurts. It can be hard to face the truth. But Mike's unabashed and cheerful personality, along with his stories of his own failures, will guide you through even the worst financial times.
Beyond that, Profit First will teach you how to build a healthier business, one that can grow big and generate more profit - without sending you into cardiac arrest from all the stress.
The book is filled with quick tips for safeguarding and improving your revenue, but the most powerful advice comes from its overarching message:
“Change the way you think about your money. Think Profit First.”
One Powerful Money-Saving Strategy from Profit First: How to Set Up Your Bank Accounts and Start the Rhythm
- “We only have one bank account for our business.”
- “Sometimes, I just use my personal bank account.”
- “What’s the point of keeping different accounts? All the money goes in and out just the same.”
This is how many business owners think, even the people who have been operating their whole lives. But you have to stop thinking like this.
One of the strategies you will learn from Profit First is how important it is to set up and use different accounts. Here’s a quick rundown on what those accounts might look like for your business:
Percent of Your Total Revenue*
- Profit [15%]
- Owner's Pay [10%]
- Operating Expenses [70%]
- Taxes [5%]
*Note: These percentages are only estimates; they will change depending on your industry and your market. If you run a small/medium-sized business in the landscaping, lawn care, or cleaning industry, you might spend significantly less on operating expenses.
Different employees have different roles. You wouldn’t send an office worker out with your mowing crews, would you? The same logic applies to your banking accounts - Taxes do NOT go to the Owner's Pay, etc.
Profit First outlines the mindset and the numbers you need to guarantee the health and profitability of your business.
This is the first step to making an important change in the way you look at your business. But this change is not instant:
"... What Rodrigo and so many entrepreneurs miss is that growing a company is not an overnight switch from doing all of the work to none of the work. The transition from working in the business to on the business happens over time--slowly, deliberately, one small step followed by another small step."
With that quote in mind, we are going to start the change, right here in this post, by focusing on just one number...
How to Build Up Your Profit Account.
It starts at 0%. We don’t want to go to 15% right away - that would be insanely costly. The goal is to get you into the rhythm of saving.
Most business owners look at their company's numbers and see "just another bank account." If that's you, get out of that habit starting yesterday. Separate out your accounts, and start small.
This is where you begin the healthiest financial habit you'll ever have: put 1% of your revenue into that Profit account. Just 1%. Tuck it away and DON’T SPEND IT. Don't worry how small that number might seem - it adds up quickly.
Next month, your goal is to drop another 1% (for a grand total of 2% of your monthly revenue) into that account, until you are stashing 15% of your total revenue every month.
What is the Point of Saving this 15% in a Profit Account?
This account serves three purposes:
- To stand as a cash reserve (in case of emergencies!)
- To measure your company's growth
- To be your take-home bonus (EVENTUALLY)
What do you do with it once it hits 15%? When do you get to take home a slice of that sweet money pie?
The answer to this question, and many more, lies in Mike's Amazing Book: go get your copy of Profit First today. If by the end of the 4th chapter, you haven’t learned anything, come back to this blog and yell at me and tell me how wrong I was. I want to hear it.
For a book on numbers, Profit First is surprisingly entertaining and easy to read. Mike’s goofy attitude really helps keep this book from being a complete snooze, and every page is brimming with entrepreneurial experience and real-life examples.