Putting Profits First

We covered the dread subject of bean-counting and accountancy in a recent post and it’s stayed very much to the forefront of my mind over the last week, thanks largely to a recent read I’d like to share with my audience.

I can’t quite remember how Mike Michalowicz first popped up on my radar, but I found myself hitting that tempting one-click purchase button on Amazon recently to pick up a copy of his book Profit First.

I pretty much devoured this in one sitting and he makes a compelling case throughout. Mike’s clearly walked the walk over his career with a classic string of early business successes, a gut-wrenching, hubris-driven financial meltdown, and a triumphant third act behind him.

Mike puts forward a simple but revolutionary proposal that should be of particular interest for anyone running a smaller business, but that applies to enterprises of nearly any size.

Put simply, he says that your business should be paying itself first in the form of profits, then making allocations for all other expenses. This is a simple but revolutionary idea and is more or less the opposite of how over 90% of businesses in the real world. It’s also, once you get into the convincing case he lays out for such an approach, a potentially very, very useful way of going about business.

I’m not going to try and butcher his overall proposition here as I’m still mulling over some of the concepts he raises in the context of my own businesses. What I will say, though, is that if you are in charge of any size of business at all, his chapters on analyzing the core numbers underpinning your current performance are solid gold.

This one is a must-read and I’d love to hear your thoughts if you’ve picked up a copy!

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