- Published: 30/04/2024
Profit First & Healthcare...
Learn how Profit First can maximise profits and streamline operations for retailers and wholesalers in the healthcare...
What if your business served you, rather than you serving your business? What if you had the power to guarantee profitability? You can with Profit First. What is Profit First? A friend may have recommended Mike Michalowicz’s 2014 book to you, or maybe the methodology has found you through the business realm and you need to hear more. In this post, we will cover what Profit First is, and why it is important for modern business owners, entrepreneurs, accountants, bookkeepers, and coaches to understand and start implementing in their financial management as soon as possible.
Profit First was published in 2014 by American author, entrepreneur, and lecturer, Mike Michalowicz. The book aims to transform your business from a “cash-eating monster to a money-making machine”. Mike explains why the GAAP (Generally Accepted Accounting Principles) is a lie and contradicts human nature, trapping entrepreneurs in the panic-driven cycle of operating check-to-check. He invites you to abandon the GAAP method, replacing it with a new system to ensure your business is ever-growing from the beginning. You can purchase Profit First from our online store, by clicking the button below.
Profit First is not just a book on financial assistance. Instead, Profit First is a life-changing practice that stops your business from running cheque-to-cheque and allows you to end the financial year with much more than just “net profit” by taking you on an endless path to profitability.
The GAAP has taught us that Sales – Expenses = Profit, but this is not helpful in growing your business to be profitable. The Profit First methodology restructures this equation: Sales – Profit = Expenses. The maths is technically the same - the change comes within the user’s behaviour. The equation is better aligned to human behaviour by taking your predetermined profit first, and only spending what is left.
This leverage in human behaviour is based on Parkinson's Law. Author and historian C. Northcote Parkinson theorised that our demand for a resource increases to meet the supply of it. For example, when we have a two-week project deadline, we will complete it in two weeks even though if we were given an eight-week deadline for the same project, it would take eight weeks to complete. Similarly, when we have $1,000 to complete a project we complete it with $1,000 and when we have $10,000 to complete the same project, we spend the whole $10,000. Profit First utilises Parkinson’s Law by taking profit first, so the money available for expenses lessens and we find cheaper ways to get the same job done. With Profit First, you are spending what is actually available rather than what you think you have.
Bank balance accounting describes the daily act of checking our bank balances and making financial decisions based on what we see instead of consistently keeping on top of our income statements, balance sheets, and cash flow statements. Profit First allows you to continue bank balance accounting, but with multiple bank accounts to ensure that you are only using your allocated available profits that are separated from your deposits available for spending.
Getting started with Profit First is simple, with a one-time setup your business will begin to grow. Here is an overview of the setup of multiple bank accounts for Profit First:
You can use the Instant Assessment (free download) to calculate TAPs, just start with percentages that are achievable for the remainder of the quarter.
We can help you with this Profit First setup, so don’t hesitate to contact us.
Many entrepreneurs force themselves to improve their accounting and bookkeeping skills, which can often lead to burnout. That’s where Profit First Accounting & Coaching and the Profit First method come in. Let us help.
Profit First works with your existing habits. We separate your income and profits, making sure that profits only increase and your business won’t stop growing. Regular profit distribution is a simple but amazingly effective technique that will not fail. It is also great as it can be implemented in all businesses, from any industry.
You can improve cash flow, pay down debt, and grow your business all with the same life-changing methodology.
So, Profit First is not only a book written by Mike Michalowicz, but also a life-changing financial methodology that ensures your business will not lose profits, no matter its size or industry. It does not ask you to change your habits, but simply monitor them. By creating multiple bank accounts split across two differing banks and TAPs, your money will always be in the right place whether it is allocated for income, profit or expenses. Profit First allows you to run your business, rather than letting your business run you. It provides you with time to focus on the tasks that inspired you to start your business instead of the ones you avoid.
Now that you know a little more about Profit First, it’s time to get started. The longer you put it off, the longer you will spend losing profits. Contact us today by calling 03 5979 2671 or book a free consultation online, here.
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