Profit First Book Summary - Profit First Book explained in key points
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Profit First summary

Transform Your Business From a Cash-Eating Monster to a Money-Making Machine

4.5 (479 ratings)
20 mins

Brief summary

"Profit First" by Mike Michalowicz is a finance book that proposes a unique system for managing income and expenses. Aimed at entrepreneurs, it emphasizes prioritizing profit over revenue and offers actionable steps for achieving financial stability.

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    Profit First
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    The traditional approach to profit rarely works because it goes against our natural instincts.

    There are millions of businesses around the world, from corner stores to huge tech companies. And there’s one thing their owners all want – to make a profit. Luckily, there’s an age-old formula to do just that. Sell as much as you can, subtract your expenses, and the rest is yours. 

    A straightforward route to success, right? Not quite. 

    A survey conducted from 2013 to 2015 by the Global Entrepreneurship Monitor showed eight out of ten businesses folding, with a lack of profits being the main reason. How does this happen when there’s a formula? The problem is the formula itself.

    The key message here is: The traditional approach to profit rarely works because it goes against our natural instincts.

    The formula sets businesses up to fail in several ways. First, it triggers our natural tendency to use up whatever is available. 

    This was discovered in the 1950s when historian and author Cyril Northcote Parkinson came up with Parkinson’s Law, which states that the amount of work required to complete a task increases in proportion to the amount of time available. For example, if someone has to complete a report in two days, they’ll spend two days doing it. Give them a week for the same report and that’s how long they’ll take.

    Swap time for money and the same thing happens in business. Entrepreneurs will find ways to spend whatever money is available and eat into their profits as a result.

    There’s another way the formula keeps profits out of reach, and it’s through something called the Primacy Effect. This is people’s inclination to focus on whatever they see first and ignore the rest. If you’re shown a list of words, for example, you’re more likely to remember the words at the top. And since the formula starts with sales and ends with profit, entrepreneurs pump effort and resources into making more sales, believing this will automatically lead to profits.

    But as you’ve just learned, profits are elusive. So, here’s the million-dollar question: how can entrepreneurs guarantee themselves a profit? 

    The trick is to rework the formula. Instead of subtracting expenses from sales, determine what your profits should be and then subtract them from your sales. So, if your goal is a 5 percent profit, subtract this before you’ve had a chance to spend it. No matter how much or how little money remains, your natural ability to work with what you have will kick in. 

    Rethinking the formula is a key step in making your business profitable, but it’s just that, a step. In the following blinks, we’ll delve into the rest of the strategy.

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    What is Profit First about?

    Profit First (2014) lays out the practical steps entrepreneurs can take to immediately see a positive difference in their bank accounts. These blinks explain how traditional accounting stands between businesses and the profits their owners dream of, and proposes a new approach that guarantees consistent profitability.   

    Profit First Review

    Profit First (2017) is an insightful book that revolutionizes the way we think about managing our businesses' finances. Here's why this book is worth reading:

    • By implementing the unique Profit First system, it helps business owners prioritize profits and achieve financial stability.
    • The book offers practical strategies and techniques that can be implemented immediately, giving readers actionable steps to transform their businesses.
    • With its engaging storytelling and relatable examples, it breaks down complex financial concepts, making it an interesting and accessible read for all entrepreneurs.

    Best quote from Profit First

    Every quarter, with every profit you celebrate, you will fall more and more in love with your business.

    —Mike Michalowicz
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    Who should read Profit First?

    • Struggling entrepreneurs who want to turn their businesses around
    • Successful business owners looking to take their profits to the next level
    • Accountants and financial managers interested in learning new methods

    About the Author

    Mike Michalowicz is an entrepreneur with over 24 years of experience and four multi-million-dollar companies to his name. He’s shared his knowledge through columns in the Wall Street Journal, Entrepreneur Magazine, and Harvard Business Review, and as a guest lecturer at Columbia University and Princeton University. He’s also the author of four other books that include The Toilet Paper Entrepreneur and The Pumpkin Plan.

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    Profit First FAQs 

    What is the main message of Profit First?

    To transform your business by taking profit first and implementing a simple cash management system.

    How long does it take to read Profit First?

    The estimated reading time for Profit First varies, but it typically takes several hours. The Blinkist summary can be read in just 15 minutes.

    Is Profit First a good book? Is it worth reading?

    Profit First is the go-to book for entrepreneurs who want to increase profitability. It offers actionable strategies and practical advice.

    Who is the author of Profit First?

    Mike Michalowicz is the author of Profit First.

    What to read after Profit First?

    If you're wondering what to read next after Profit First, here are some recommendations we suggest:
    • Accounting Made Simple by Mike Piper
    • Clockwork by Mike Michalowicz
    • Simple Numbers, Straight Talk, Big Profits! by Greg Crabtree and Beverly Blair Harzog
    • The 1% Windfall by Rafi Mohammed
    • The Financial Numbers Game by Charles W. Mulford
    • Pricing For Profit by Peter Hill
    • Fix This Next by Mike Michalowicz
    • Buy Back Your Time by Dan Martell
    • The Pyramid Principle by Barbara Minto
    • Quantum Marketing by Raja Rajamannar