Can you explain what is Profit First?

Christie JungeA Plus Solutions Inc. · CEO | Profit First Professional

What Is Profit First? 'Under The Covers' Ep #1 with Mike Michalowicz

7 Oct 2019 · 0 min

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0:16

In this brief interview segment, the host asks Mike Michalowicz to define the Profit First methodology. Michalowicz clarifies that Profit First is not about greed but about changing the perception and management of profit. Traditional accounting treats profit as the bottom‑line figure calculated after all expenses, implying it is an afterthought. Profit First flips this by placing profit at the top of the equation—sales minus profit equals expenses—so a predetermined percentage of every sale is immediately set aside for profit. This behavioral accounting approach ensures profitability by forcing business owners to allocate profit first, rather than treating it as a residual.

Questions this video answers

Profit First is a behavioral accounting approach that puts profit at the top of the formula—sales minus profit equals expenses. A predetermined percentage of each sale is immediately allocated to profit, ensuring the business remains profitable. It’s not about greed; it’s about changing how profit is perceived and managed.

Give me a question. Yeah, yeah. Can you explain what is Profit First?
So it's funny, I get this question relatively often that people don't understand what Profit First is, and their first impression when they see the book cover is like, oh, this guy is all about greed and it's profit over people. And that's not at all what it's about. It's about the perception of how profit's managed. In traditional thought, profit is the bottom line, it's the year end. But it's our behavior when something comes last. We call it the bottom line. When something comes last, it means it's insignificant. Like you would never say, I'm gonna put my health last or my family. Well, your family maybe, but I'm gonna put my family last. You would never say that unless they are insignificant. So what we do with Profit First is we put profit at the top of the formula. So the new formula is sales minus profit equals expenses. And how it works in practice is every time you have a deposit for sales, you immediately take a predetermined percentage, allocate it toward profit to ensure the profitability of your business. That's what Profit First is. It's a behavioral flip on how we manage profitability.
Perfect. Easy peasy.
We nailed it. Welcome to under— or goodbye from under the covers.