dahnaborg's review against another edition
5.0
Game changing. Wish I read this before I started my business or at least 2-3 years ago. A must read for every business owner.
jakehlebain's review against another edition
5.0
Every entrepreneur and self-employed small business owner should really spend a few hours with this book -- particularly the chart on p. 68. Followed by a 10 minute call to your bank and you should be set up!
What I am taking away:
We all got into what we did for personal freedom and financial freedom. Author Mike Michalowicz asks the questions, "do we have a cash management system in place to make that possible?" For me, that was a resounding N-O. Basically by following the chart on p. 68 based on real revenue (top line revenue - cost of material and subs, or if in a service-based business like myself, just revenue). From there we open 5 checking accounts at bank 1:
1) INCOME (every dollar of sales goes here)
2) PROFIT
3) OWNERS COMPENSATION
4) TAX
5) OPEX (Operating Expenses)
and two at bank 2:
1) PROFIT HOLD
2) TAX HOLD
Every dollar earned goes into your income account and divided to accounts 2-5 according to the percentages found on p. 68. Now, twice a month, you will pay yourself what a fair salary for an employee doing your job would be from the owner's comp account, pay your bills, and transfer all the tax and profit into a separate bank. A lot of this is a behavior. By making the tax and profit at a second bank, we never see/are tempted by the funds. Now, quarterly, you pay yourself a profit of 50% of the total amount in the profit hold account. Spend it on something that makes you happy/personal debt pay down, but NEVER IN YOUR BUSINESS. This is a separate reward for risking capital. Additionally adjust the %'s for each and protentially give yourself a raise if your Owner's Comp is accumulating faster than paying you.
What I am taking away:
We all got into what we did for personal freedom and financial freedom. Author Mike Michalowicz asks the questions, "do we have a cash management system in place to make that possible?" For me, that was a resounding N-O. Basically by following the chart on p. 68 based on real revenue (top line revenue - cost of material and subs, or if in a service-based business like myself, just revenue). From there we open 5 checking accounts at bank 1:
1) INCOME (every dollar of sales goes here)
2) PROFIT
3) OWNERS COMPENSATION
4) TAX
5) OPEX (Operating Expenses)
and two at bank 2:
1) PROFIT HOLD
2) TAX HOLD
Every dollar earned goes into your income account and divided to accounts 2-5 according to the percentages found on p. 68. Now, twice a month, you will pay yourself what a fair salary for an employee doing your job would be from the owner's comp account, pay your bills, and transfer all the tax and profit into a separate bank. A lot of this is a behavior. By making the tax and profit at a second bank, we never see/are tempted by the funds. Now, quarterly, you pay yourself a profit of 50% of the total amount in the profit hold account. Spend it on something that makes you happy/personal debt pay down, but NEVER IN YOUR BUSINESS. This is a separate reward for risking capital. Additionally adjust the %'s for each and protentially give yourself a raise if your Owner's Comp is accumulating faster than paying you.
darrylb's review against another edition
5.0
If you're in business, you *need* to read this book. Now I understand why so many business owners struggle with the daily grind of bills - they don't take this approach. I'm early in my current phase, so reading it now has helped me recast the way I think about revenue, costs and profit. This is a valuable book!
mandympower's review against another edition
3.0
Profit First is the Dave Ramsey version of the business. It's really a basic budgeting book. The premise is most business owners don't run based on budgets. Mike has worked with many businesses to implement these budgets (although he doesn't call them that in the book, smart marketing) I think it's a good rule of thumb, but much like DR. It's not really a one-size fits all model, but to preach it to the masses you must simplify. Otherwise, your message gets jumbled.
How to Determine Whether You Can Afford a New Employee:
There is a really simple formula for determining whether you can afford a new hire - or if your business is currently understaffed or overstaffed. For each full-time employee, your company should generate real revenue of 150 - 250 K So if you want a million dollar company, you can afford 4 - 6 employees.
How to Determine Whether You Can Afford a New Employee:
There is a really simple formula for determining whether you can afford a new hire - or if your business is currently understaffed or overstaffed. For each full-time employee, your company should generate real revenue of 150 - 250 K So if you want a million dollar company, you can afford 4 - 6 employees.
fatherroderick's review against another edition
4.0
I loved this book. Even though it's focusing on financial management of self-employed people and businesses, it helped me apply the same principles to time management. Reserving hours for various important aspects of your life (health, relationships, prayer, work, reading, sleep) and treating them as separate 'bank accounts' from which you can't 'steal' to fill a budget deficit is a game changer. Applying the principle of 'profit first' actually means: putting yourself, your health, your well-being, your relationships first. I've often put all those priorities last - to my own detriment.
minimalist_coach's review against another edition
4.0
A must read for any entrepreneur, or small business owner.
I see so many business coaches telling people to scale when they don't have their foundations set, or to strive for that 6 or 7 figure goal, no matter the cost. Growth for growth sakes means nothing. If you can't pay yourself without going into debt, it's time to rethink your strategy.
This book in its most basic form is the envelope budget method for businesses. It shows an easy to understand system to help business owners understand their money and determine which projects or products are turning a profit and which are not.
I see so many business coaches telling people to scale when they don't have their foundations set, or to strive for that 6 or 7 figure goal, no matter the cost. Growth for growth sakes means nothing. If you can't pay yourself without going into debt, it's time to rethink your strategy.
This book in its most basic form is the envelope budget method for businesses. It shows an easy to understand system to help business owners understand their money and determine which projects or products are turning a profit and which are not.
stenaros's review against another edition
5.0
I'm starting my own business (Keen Eye Copyediting & Beta Reading, 3SMReviews.com) and there is so much to learn. Among the many things I have low-grade anxiety about: where should the money go?
How to ensure that I have enough put by for taxes, for expenses, and to allocate for my own pay for my work?
Mike Michalowicz has a plan. He wants all small business owners to put profit first. This book provides a solid framework for the financial architecture of your business. If you are starting a new business, it should be on your reading list. If you have a business, but feel like you never make any money, this book should be on your reading list. Or maybe you should start reading it. Today.
Also, if you already use YNAB, you will have a basic understanding of the Profit First system. And also probably enough skills that will let you skip opening all the bank accounts.
How to ensure that I have enough put by for taxes, for expenses, and to allocate for my own pay for my work?
Mike Michalowicz has a plan. He wants all small business owners to put profit first. This book provides a solid framework for the financial architecture of your business. If you are starting a new business, it should be on your reading list. If you have a business, but feel like you never make any money, this book should be on your reading list. Or maybe you should start reading it. Today.
Also, if you already use YNAB, you will have a basic understanding of the Profit First system. And also probably enough skills that will let you skip opening all the bank accounts.