Profit First Summary for Small Business Owners

10 Key Takeaways

For solopreneurs and business owners who want to escape the feast-or-famine cycle and start paying themselves consistently.

• This is the core formula: Revenue - Profit = Expenses. You must take your profit first and force your business to run on what's left.

• Set up multiple, separate bank accounts (e.g., Profit, Owner's Pay, Tax, Operating Expenses) to create a simple envelope system for your business cash.

• Treat profit as a non-negotiable expense. Pay it to your profit account first with every deposit, just like you'd pay rent.

• If your business is cash-strapped, start by allocating just 1% of every deposit to your profit account. The habit is more important than the amount.

• Pay yourself a quarterly profit distribution as a reward. This is the why that builds your sustainability and joy as an owner.

• This system lets you run your business based on the actual cash in your bank accounts, not a complex Profit & Loss statement you don't understand.

• You must park your tax money in a separate, hands-off account with every deposit. This eliminates the #1 source of founder financial panic.

• By moving profit and tax money out, your Operating Expense account shrinks, forcing you to be more innovative and lean with your spending.

• This system works with your human nature of checking the bank balance to see what you can spend, rather than fighting against it.

• It's the ultimate system to transform your business from a cash-eating monster into a predictable, money-making machine.

From Cash-Eating Monster to Saleable Asset

Mike Michalowicz provides the system that is the #1 antidote to the messy books trap. A business that isn't profitable is worthless to a buyer. This simple, behavior-based system ensures your business is financially healthy, profitable, and ready for an exit. Read our guide on how this fits into your saleability plan: Your Business Isn't Saleable (Yet). Here's How to Fix It.

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