Profitability, Financial Planning, Accountancy, Business
Profit First by Michalowicz reveals the simple but effective accountancy techniques you can apply to ensure your business becomes profitable – permanently. Recognising that money is the lifeblood of any business, Michalowicz explains that many entrepreneurs don’t make any money and plough in all their time and resources only to end up with no profit. His formula helps you transform your business into a money-making machine – an approach that works for both new and existing businesses. Profit First is built on a simple concept: before you pay your expenses, take your profit first. If you run your business based on what you can afford now, not what you hope you can afford ‘someday’ – you can make profits from day one. If you’ve been losing money for years and can’t even pay yourself a salary, then this book will help you to change your business finances for the better.
According to Michalowicz, businesses often get into financial trouble due to making two big mistakes: They suffer from the misconception that bigger is better, and they focus on the vanity metrics of turnover instead of cashflow and profits.
The Profit First approach turns the status quo on its head. Instead of the traditional formula (Sales – Expenses = Profit), Michalowicz introduces a new formula to the mix: Sales – Profit = Expenses.
His method ensures your business’s core focus is on profit and that this is not just a bonus.
The book covers the following:
- How to set up your five core accounts and your two ‘no temptation’ accounts and how to manage the funds within these accounts properly.
- How to evaluate the health of your business.
- How to define your allocation percentages – looking at both current and target.
- How to reduce wastage within your business, from unnecessary debt and expenses to freeing up cash.
In short, Michalowicz’s book is not just about reviewing your business but making this way of working a way of life. It is suited for both business and personal finance and is an essential read for all entrepreneurs who want to achieve financial freedom and take control over their money.
If you’re not a numbers person, don’t fear. This book uses plain English and simple maths to help you transform the finances of your business.
As someone who comes out in a rash at the sight of a spreadsheet, I knew this was a must read. However, of all the financial books I’ve read, it was easy to understand and apply the financial approach and concepts demonstrated.
Does what it says on the tin: 9.5/10