Many books are recommended to me by friends and colleagues, but not this time. Although I had heard of Profit First before (especially from my good friend, Chris Ducker), it wasn’t until a few of my own students in my higher-level mastermind/coaching group, the SPI Accelerator, gave the book recommendation that I took the time to read it.
I’m so thankful I picked it up!
Even though my team and I practice a lot of the principles in Profit First already, reading it was a good reminder as to why we practice those things, such as building a business that actually makes profit the priority rather than paying for expenses first. Better yet, this book was a reminder for me to pass along this methodology of building a business to you, and the money management strategies that go along with it, so that you don’t create the “Cash-Eating Monster” many businesses fail to realize they are feeding.
In addition to those business-focused gems, Mike’s writing style is amazing. Even though I’m familiar with the concepts, I looked forward to reading more just because I like his witty and self-deprecating style that much. For instance, he often refers to himself as a “fool,” or being “full of snark” after cashing out on a successful business sale, only to be mislead by having a lot of money and going down a direction that would ultimately leave him in the hole.
That’s pretty rare to find in a business book—a style that keeps me laughing and engaged in this way, beyond the content.
I also really resonated with Mike’s analogy of a business to the story of Frankenstein. Over the first 6 years of my business’ life, I often referred to it as a sort of Frankenstein where I sort of just cobbled together what I could, with what I had, not really knowing what I was doing, but experimenting quite a bit, and giving life to this machine: the business. But, Mike takes it even further and helps us realize that as much of a miracle as it may seem to have built such a thing, it can turn on us, just like the monster in Frankenstein does. It becomes destructive, and can become a cash-eating monster that can leave you more stressed and broke and without freedom—the exact opposite reason we got into business in the first place.
Profit First is all about developing a mindset shift in our business, to make sure we build something that lasts, that pays us, and doesn’t eat us alive.
Here’s another great example of how this book changes our perspective. Traditional accounting looks at our businesses like this:
Sales – expenses = profit
But Profit First has us look at it this way instead:
Sales – profit = expenses
It may seem the same, but psychologically, it’s not. When we build for profit first, Mike says, psychologically we feel we’ll have less to spend, and therefore, spend less. Another way to put it is through his analogy of a tube of toothpaste.
When we first get a tube of toothpaste, we’re very liberal with how much we use. We go crazy with it. But, when we’re close to the end of our toothpaste tube’s journey, we’re a lot more frugal with how much we use. Therefore, if we instead remove profit first from our sales, which is money in our pocket, we’ll have less to spend, versus spending more and having less for ourselves.
Make sense? Pretty cool, right?
So, with all of that, I say that if you’re building a business of any kind, and want to avoid making big mistakes that could cost tens of thousands, if not millions of dollars in the long haul (because we are in this for the long haul, right?) then you’re going to want to read Profit First. There’s a lot of accounting, which may seem a bit boring up front, but Michalowicz’s writing style and useful analogies make it easy to understand, and more importantly, very obvious why we need to take the Profit First approach.