A short YouTube presentation by Ryan Deiss advising entrepreneurs to adopt a profit-first approach using expense ratios. He argues entrepreneurs should determine a target profit margin before setting expenses (reframing the relationship as "Revenue − Profit = Expenses") to avoid overspending. The clip previews a follow-up explanation of how to choose a profit margin using the "rule of 40."
Every entrepreneur knows their business should be profitable. Obvious, right? But how profitable? So if you want to be consistently profitable, this is for you. Use expense ratios. They're super simple. Whether your business makes 50k or 50 million, it doesn't matter. It still applies. We do it in our $10 million businesses, and it will work in your business too. So let's talk about the first step. More entrepreneurs need to understand this. An optimistic entrepreneur's ability to spend will always outpace their ability to earn, which is why profit must be determined ahead of time. Therefore, step one of setting up expense ratios and becoming a profitable business is determining your profit margin first. So many business owners think about profit margin like this. They think about revenue minus expenses equals profit. As a result, they earn, they spend, and they find out later on what's left over. And that's why they lose money. It's an afterthought. But here's how we really should be looking at profit. Revenue minus profit equals expenses. That's what everything with expense ratios is based on. We must be profit first. If you understand this, then now we can talk about how to consistently hit that profit. And what we're left with is a very valid question. Well, Ryan, it if my profit needs to come first, then how am I supposed to pick what my profit margin should be? Simple. Use the rule of 40, which I'll explain in part two.
