Profit First teaches entrepreneurs to prioritize profit by allocating a percentage of income to profit before expenses, ensuring sustainable growth and financial management.
Main Lessons
- Change the formula: Sales minus profit equals expenses, not the other way around.
- Serve from a smaller plate to control expenses, as smaller budgets encourage resourcefulness.
- Distribute profit first to benefit from it, similar to starting a meal with healthy food.
- Remove temptation by transferring profits to hard-to-access accounts, ensuring they stay untouched.
- Regularly evaluate finances with a simple system to avoid inflated perceptions of success.
- Five bank accounts: Income, operating expenses, owner’s compensation, tax, and profit keep finances transparent.
- Start with modest profit allocations to build the habit without straining the business.
- Increase allocation percentages as the business grows, moving towards ideal financial health.
- Profit acts as a protection, offering peace of mind and a buffer for emergencies.
- Focusing on profits drives attention to high-margin products and efficient business processes.
- Creating separate savings accounts for profit and taxes helps keep funds secure.
- The system creates a discipline that transforms businesses from cash-eating to profit-making.
