This has been an ongoing topic on conversation in many of LXCouncil groups after we introduced Michael Michalowicz’s book, “Profit First,” to several of our business mastermind groups last summer.
Many of our business owners and CEOs read it and quickly implemented the strategies presented. Others delayed. They either weren’t ready to make the recommended changes or didn’t quite buy in to the ideas at all. Whatever side of the coin you come in on, the transformation and impact of these strategies for many of our members is undeniable. Some of those who delayed, ultimately jumped on board because of the testimonials around the table attesting to its impact.
Which is why we choose to share it again here …
With the Profit First approach, your business can be instantly (and permanently) profitable with your next deposit. This claim is reinforced in Michalowicz’s book, “Fix This Next.” It’s no surprise that in his new “how to” business guide he dedicates a full chapter to profit and his “Profit First” philosophy.
In his words, the “…way to become permanently profitable” is to simply commit to taking a percentage off the top of every deposit going forward and setting it aside (in a separate account) dedicated to profit. That’s it!
Don’t be fooled, though.
Profit is NOT for reinvesting back into the business.
Profit is NOT for paying your taxes.
Profit (by Michalowicz’s definition) is simply cold hard cash for the owner to use for themselves in any way they want. The key phrase is, “to use for themselves.”
The fact is, too many business owners look at the business bottom line and call that their “profit.” Then they say they “reinvested” the profit back into the business. That is not profit. If the business pays for something, it is an expense. He reinforces this idea over and over and over. You haven’t made profit until you’ve TAKEN profit.
It essentially flips the script on traditional thinking from Accounting 101:
The new script is:
SALES – PROFIT = ALLOWABLE EXPENSES
In other words, you plan for and take your PROFIT first.
This then defines (and reigns in) your allowable expenses.
Have you tried the Profit First strategy in your business?
If so, we’d love to hear more about your experience!
If you haven’t, we recommend that you join many LXCouncil business owners and CEOs and pick up and read both, “Profit First” and “Fix This Next,” by Mike Michalowicz. Both books just might be an excellent investment in the profitability of your company!
If you’re ready to take your business and leadership skills to the next level, and if you think your business could benefit from more insights like what’s offered in this article, let’s start a conversation. LXCouncil may be the perfect next step!
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