By his 35th birthday, Mike Michalowicz had founded and sold two multi-million dollar companies. Confident that he had the formula to success, he became an angel investor… and proceeded to lose his entire fortune.
Then he started all over again, driven to find better ways to grow healthy, strong companies. Among other innovative strategies, Mike created the “Profit First Formula”, a way for businesses to ensure profitability from their very next deposit forward.
Mike is now running his third million dollar venture, Profit First Professionals (an organization that certifies accountants and bookkeepers in Profit First methods that drive profitability for their clients), is a former small business columnist for The Wall Street Journal; is the former MSNBC business make-over expert; is a popular keynote speaker on innovative entrepreneurial topics; and is the author of Profit First, The Pumpkin Plan and The Toilet Paper Entrepreneur
Favorite Success Quote
“Profit is not an event, it’s a habit.” – Mike Michalowicz
1. Rethink Your Current Profit Model
Most people in business follow the traditional profit model of “Sales – expenses = profit”
However, Mike proposes something different.
He suggests that you completely rewrite the model and flip it on its head so that “Sales – Profit = Expenses”
With this formula, you are paying yourself first.
You are taking care of your business, yourself, and your taxes before you even think about overhead.
By doing things this way, you are forced to reevaluate your expenses and figure out what is really important.
When you aren’t paying other people first, you are free to take your profit and determine which expenses you really need to incur.
I challenge you to rewrite your company’s profit model for just one quarter.
Use this formula for 90 days, and see if the results don’t change your life.
2. Profit is a Habit
A common entrepreneurial misconception is that profit is an event.
They think it’s one big payday. It’s IPO. It’s selling your company. Or it’s closing that 7 figure deal.
But the truth of the matter is that profit is a habit.
Profit is the “skill” of paying yourself first and limiting your expenses.
It is not some elusive point in the future.
It is the habit that you need to start cultivating today.
3. Survival Mode Takes Us Away from Our End Goal
As an entrepreneur, your first mission is to break out of survival mode.
When you are completely focused on making payroll, paying for your next meal, and keeping the lights on, you are unable to focus on what really matters and how you can scale your business to achieve your goals.
To escape survival mode, you must start to pay yourself first, cut back on the expenses, and go beyond just earning “fast cash” that puts you even more off course.
4. Do Not “Borrow” From Yourself
Once you make the commitment to take care of profit first, you must completely eradicate your bad habit of “borrowing” from yourself.
You know what I am talking about.
Those “just this one-time” moments where you decide to dip into your savings account, profits account, or tax account to cover payroll or manage your expenses.
Because it’s never “Just this once” and you almost never return the money that you borrowed.
To eliminate this habit forever, go set up multiple bank accounts today, and create 2-3 “ghost” accounts.
Set up these accounts with out of state banks “if possible” and have them turn off online banking.
This will make it extremely difficult to access the money and all but eradicate the possibility of “borrowing” from yourself and ultimately screwing yourself over.
5. Profit = Peace
One of the biggest problems that entrepreneurs will face is the constant struggle to generate and maintain cash flow and profit.
Whenever you can create systems in your business that generate sustainable and regular profit, you will alleviate so much of the stress and the mental burdens associated with owning a business.
When you commit to this model of profits and expenses, you will quickly lower your anxiety levels and be empowered to show up more powerfully in the rest of your life.
Profit first will not only transform your business, it will also transform your health, relationships, and sense of spiritual well being.
As soon as you commit to putting profit first, your life will never be the same.
I guarantee it.