Brian Gubernick explains Mike Michalowicz's Profit First method: flip the equation from sales minus expenses equals profit to sales minus profit equals expenses. Set up separate accounts, move a percentage to profit immediately after each deposit, and let constraints force you to spend less. The same logic works for personal finance: automate savings before you spend.
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Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. Today I want to talk about a pretty simple concept, and I think this really simple concept can dramatically change your business, and it can even change your personal life. It comes from the book Profit First by author Mike Michalowicz. Many of you have probably read the book Profit First. You may have loved the concept of the book Profit First, but you didn't implement, or if you did, it faded. So if this is you, let it serve as a reminder, because I think again that this simple concept can change the game. The premise is incredibly straightforward. Most businesses use this formula. They say that sales minus expenses equals profit. Sales, your revenue, minus your expenses equals profit. In other words, whatever is left over, we consider that profit. Well, the problem with that, for many businesses, there's rarely anything left over, or if there is something left over, it's probably not as much as you'd like to see there. So, so Mike Michalowicz flips the equation. What instead he says the equation should be is sales minus profit equals expenses. Sales minus profit equals expenses. So in other words, you take your profit first and then you operate the business on what remains. Now, that sounds really simple, but it's not easy. Okay? Now, so many of you listening here today are entrepreneurs. You run a business, and, and I'm talking about this in your business sense, in the sense of your business. However, we'll get to it here in a bit. Keep in mind, this very much applies to your personal world, so stick with me. Okay? So, the problem in business, most entrepreneurs treat profit like it's a reward. I've seen this so often in my coaching and my business experience. Entrepreneurs treat profit like it's a reward. If we hit our goals or if there's anything left or if we have a good month or a great month. And what happens as a result? Revenues go up. Expenses though quietly follow. They creep. Maybe it's more staff or more overhead. More technology. You scale your revenue, but you, but you don't scale your margin. And again, I've seen this in real estate teams and property management companies and startups that, you know, I get to advise. I see it everywhere. We have a real tendency to celebrate top-line growth, but cash flow stays tight. Well, profit first, the concept of profit first forces a different degree of discipline. Instead of asking what's left, you start to ask, hey, what percentage are we committing to profit? What percentage are we committing to profit? In other words, I define my profit before there's even a chance for the leftover to occur. I'm gonna back into, I'm gonna define my profit. And then you move that money first. What do I mean? Not later. Not, not after, but you move it first. Here's how it works in, in practice, the way Mike Michalowicz talks about it. He says use separate accounts. So literally go establish new accounts. If you want to go deeper into the, into the concept, pick up the book, but just, just work through this here with me. Make believe you create separate accounts. Income comes in, okay? Revenue comes in. Then you allocate percentages immediately to a profit account, to your owner's pay account, to taxes, and then lastly, to operating expenses. You physically move the money. Why does Mike want you to do that? It's because behavior follows structure. If all of your revenue sits in one account, as so many businesses do, then you'll subconsciously treat it as available. So if operating expenses are capped by design, then you're forced to innovate within constraints. And I'm sure if you've been listening to the No Days Off podcast the past couple weeks, when I mentioned the word constraint, it probably sounds familiar because again, constraint drives that creativity. So here's where I think this connects to your leadership and to scaling. Profit First is really about boundaries. It's forcing you to say, this is the amount we are allowed to operate with. And instead of expanding expenses to match income, you could optimize within limits. And I think that really changes your thinking because it's going to force prioritization and efficiency. It's gonna force elimination of waste. And ultimately, it's gonna lead to smarter decision-making. In many cases, what I've seen, businesses don't have revenue problems. They instead have discipline problems. And "Profit First" does an amazing job exposing that. Now, as I mentioned just a few moments ago, you could apply this to your personal world. Most individuals operate like this. They have income, their income coming in, then they have their lifestyle, and then whatever's left over is savings. And savings rarely happens. Just like the profit example at the start, savings rarely happens. Lifestyle tends to expand to match that income, be it a better house or a better car or, or higher-end meals, or more of everything. And then we wonder why investing feels tight. Well, the Profit First principle in the personal world would look like income minus investment equals lifestyle. So in other words, you invest first, you save first, you automate first, and then you live on the remainder. That's not restrictive. It may sound restrictive at first, but it's not restrictive. I think it's more empowering because when you do this, it's going to almost guarantee progress. I think this matters for so many reasons, but maybe one of the biggest reasons is that the financial stress has a tendency to bleed into leadership and decision-making. When you're operating on thin margins, be it professionally or personally, Everything starts to feel reactive. But when profit is built into the system, you're going to gain some breathing room. You're going to gain confidence. You're going to be able to make better decisions because you're not going to feel desperate. And desperation oftentimes comes from just poor structure. Profit First is in fact a more solid structure. It's not about greed or it's not about squeezing every dollar. It's just more about intentional design. Now, the deepest layer to all of this is that Profit First shifts you from hoping to planning, and that becomes more of an identity shift. It's going to shift you from, well, let's see what's, what's left over, to, hey, my profit is non-negotiable, my savings are non-negotiable. I think it's a, it's a totally different mindset. I think it's a leadership mindset. Leaders design sustainability into the system. If your business is not consistently profitable, then it can't scale. If your personal life isn't consistently investing or saving, you're not building wealth. Revenue is vanity, profit is sanity, okay? And cash flow, in my opinion, is oxygen, oxygen to any business. So a couple action items for you this week. Decide on a profit percentage for your business. I don't care what the percentage is, just decide on what a profit percentage is for your business. And then maybe open a separate account and move that percentage immediately from every single deposit that you make. If you're going to work on this from the personal side, same approach. Pick an investment percentage, automate it, and then live on what's left. Start small if you need to. We're looking to just build the habit. Okay? We're looking to just build consistency. Because once that profit or that savings becomes a habit, then your growth becomes rather intentional. And that's, that's really what we're all about here at the No Days Off Podcast. That's all I have for you today. The No Days Off Podcast. Thank you so much for listening. And remember, every single day brings a new opportunity to get better. So let's get after it.
