Profit First
Transform Your Business from a Cash-Eating Monster to a Money-Making Machine
Author: Mike Michalowicz
Length: 224 pages (~6 hour read)
Formats: Paperback, Kindle, Audible
Grab your copy of Profit First on Amazon here.
Why This Book Matters
Most entrepreneurs run their business by looking at their bank balance—and wondering where the money went. Profit First flips the traditional accounting formula (Sales – Expenses = Profit) on its head. Instead, it says: take your profit first, then spend what’s left. If cash flow is tight, you’re behind on taxes, or you feel like you’re always running hard but not getting ahead—this book will change how you manage money, permanently.
Core Idea
Traditional accounting makes profit a leftover—something that might show up at the end of the year (or not). Profit First forces you to prioritize profit by taking it out first. The idea is simple: set up multiple bank accounts, allocate fixed percentages of income to each one (profit, owner’s pay, taxes, expenses), and manage your business off the real cash in each bucket. It’s envelope budgeting for entrepreneurs—with discipline baked in.
Key Tactics & How to Apply Them
1. Flip the Formula
Sales – Profit = Expenses. Take profit first, and force your business to live on what remains.
How to apply: Transfer a set percentage of every deposit into a separate “Profit” account—before paying any bills.
2. Set Up Small Plates
Humans consume what’s in front of them. Business owners spend what’s in their operating account.
How to apply: Open five bank accounts: Income, Profit, Owner’s Pay, Tax, and Operating Expenses. Allocate incoming cash based on fixed percentages.
3. Start Small, Then Adjust
Don’t shock your system. Begin with 1% profit, then gradually increase.
How to apply: Review your current expense structure, then commit to monthly “profit distributions”—even if they’re tiny at first.
4. Hide the Profit Account
Temptation kills discipline. Remove easy access to your Profit account.
How to apply: Open your Profit and Tax accounts at a separate bank with no online access. Make it inconvenient to withdraw.
5. Quarterly Profit Bonuses Only
You earn the right to enjoy profits—but only if you’ve run your business with discipline.
How to apply: Every quarter, take 50% of what’s in the Profit account as a reward. Leave the rest for reserves or reinvestment.
Real-World Example
A small agency making $800K/year had no profits and constant cash crunches. After implementing Profit First, they immediately started allocating 5% to Profit, 50% to Owner’s Pay, 15% to Taxes, and ran the business on the rest. Within 9 months, the owner had saved a tax reserve, taken their first real profit distribution, and finally felt in control of the company’s finances.
When to Use This Book
You’re making money—but it never seems to stick
You’re behind on taxes or struggling to pay yourself consistently
Your expenses keep expanding to match your revenue
You need a simple system to bring financial discipline to your business
Grab your copy of Profit First on Amazon here.