Mike Michalowicz explains Profit First, a method that flips traditional accounting by taking profit first instead of last. Instead of Sales minus Expenses equals Profit, it's Sales minus Profit equals Expenses. A set percentage of every deposit goes straight to profit before anything else.
Do you have 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 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 going to put my health last or my family. Well, your family maybe, but I'm going to 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.
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It.
