Mike says that most companies operate on the “make money take money” theory. You make money that day and it’s in your bank account, then it’s there to spend.
But, and it’s a huge but, did you know that 83% of small businesses (making less than 26 million per year) are surviving check to check?
Mike shares how the old way of figuring out your profits is dead…..
The old way is: Sales – Expenses = Profit
It’s a kick the can down the road way to build a company.
What Mike discovered with the “Profit First Formula” is simple when you break it down……just flip the formula.
Now the new way to be profitable is: Sales – Profit = Expenses
This forces you to address your behavior around money.
Hang out with me and Mike and learn how to take your profit first and figure out how to run your business mean and lean with the allotted operating expenses.
Entrepreneurs tend to pay themselves last…….but not any more thanks to Profit First. Mike and I agreed that we’d never underpay our best employee right? Well no one is more dedicated and better deserving than the boss! Which BTW is YOU!
The theory behind Profit first is that you put all the money into one “Income” account and every 2 weeks, before you spend anything, move the money into the specific accounts below in order to be profitable and limit your expenses to what you can actually really afford.
Example of setting up multiple accounts
Income Account (all deposits): then use to this money and divide it up into the accounts below.
Profit account: This is bonus pay – add 10% of income account here and every 90 days allocate 50% to the boss (you) and any other owners.
Owners pay acount: This is for owner/operator salary – you are an amazing employee – you get 25% – pay out to yourself every 2 weeks.
Tax account: Put money here for taxes so you don’t get caught with your pants down – put in 15%.
Operating expense account: Depending on your business you may need up to 50% of your income here – pay employees, overhead etc..
If you really do this……. you’ll quickly see it forces us to be more creative
More about Mike…..
By his 35th birthday MIKE MICHALOWICZ (pronounced mi-‘kal-o-wits) had founded and sold two multi-million dollar companies. Confident that he had the formula to success, he became an angel investor… and proceeded to lose his entire fortune.
Then he started all over again, driven to find better ways to grow healthy, strong companies. Among other innovative strategies, Mike created the “Profit First Formula”, a way for businesses to ensure profitability from their very next deposit forward.
Mike is now running his third million dollar venture, is a former small business columnist for The Wall Street Journal; is the former MSNBC business make-over expert; is a popular keynote speaker on innovative entrepreneurial topics and superstar places like Harvard, Ebay and Princeton; and is the author of 4 books……..Surge, Profit First, The Pumpkin Plan and The Toilet Paper Entrepreneur, which BusinessWeek deemed “the entrepreneur’s cult classic.”
Visit Mike Michalowicz
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