Book Review: Profit First by Mike Michalowicz

Some that read this know that I read a lot of books, almost 150 last year and a little over 180 the year before.

Profit First is my first 5-star book of the year. To me, 5 stars means that everyone should read it, not just people that are interested in this topic. I enjoyed the whole book. The topic is meaningful. It’s presented in an approachable and understandable manner, and if you listen to the audio version, I think hearing it from Mike himself adds an element that I believe I might feel is missing if I went to the written word version.

The Fundamentals of Profit First

The basic idea behind Profit First is that many businesses budget ineffectively and would be better served by budgeting for their profit (and as the book explains, several other things) immediately upon receipt of funds rather than for example waiting until the end of a month, quarter, or year and hoping that there is some money left in the bank account that we can call profit. Mike makes the argument that businesses should determine how much they want to allocate to profit (and again, other things as well such as operating expenses, taxes, etc) and then have those funds immediately–and ideally automagically–sequestered into bank accounts dedicated to each specific use.

In the book, Mike points out that many businesses think of their money management like this:

Sales – Expenses = Profit.

When, they should think of it like this:

Sales – Profit = Expenses

There are numerous arguments for this, all of which I found compelling, but the one I will share is that business owners often put in the investment of blood, sweat, tears, time, heartbreak, anxiety, etc and then also typically take home the smallest paycheck. If you are putting in all of that effort, and especially when you are commonly the most valuable employee that will work nights, weekends, and whatever else without thinking twice about it, you deserve the benefit of knowing you’re going to get paid.

Many business owners object to this initially in that they feel that you have to make investments to grow and so on or that they cannot afford to set aside profit first because they won’t be able to pay for other things, but instinctively, I align with Mike’s argument that–if you can’t afford it–you don’t have a viable business. And, one of the things you need to be able to afford is profit.

You can have $100 million per year running through your business, and maybe you impact a lot of people because of that, but if you can’t take home a profit because your expenses eat up everything, can we really call you successful? Even if you say that you’ll make up the money when you sell, think about what will happen when someone buys your business. If the profit margins aren’t there, they are going to have to make some changes in order to recoup their investment, and it’s easier to cut from the bottom line than it is to grow the top line generally, so whoever buys your business will simply do some of the things that you should have done in the first place in order to make your business more profitable.

Why wait? Why not make your business more profitable today and enjoy the benefits that go along with creating opportunities, giving people jobs, realizing a mission, working for yourself, and more?

Odds and Ends

Most of the books I go through are audiobooks, and Mike calls out in the audio version of this book that he has added some things that you won’t get in the paper or ebook version. Having not seen the written word version, I cannot say for sure, but it seemed pretty obvious what the additions were, and I enjoyed them, so I suggest the audio version. I also enjoyed that Mike read it himself. It’s nice to hear the intonation and energy he brought to his own book.

If you’re interested in more about Profit First, you can check it out on Amazon here or on Goodreads here.
And as always, you can connect with me on Goodreads if you are interested in seeing what I’m reading now.