Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine

Accountants define profit differently than entrepreneurs. They point to a fictitious number at the bottom of an accounting report. Our definition of profit is simple: cash in the bank. Cold. Hard. Cash. For us.

When less money is available to run your business, you will find ways to get the same or better results with less. By taking your profit first, you will be forced to think smarter and innovate more.

You need to intentionally make less toothpaste (money) available to brush your teeth (to operate your business). When there is less, you will automatically run your business more frugally (that’s good) and you will run your business far more innovatively (that’s great!).

The perfect size for your business? It will happen naturally, when you take your profit first. You will reverse engineer all the elements of your business, and as Fried says, “the right size will find you.”

Without enough money, we cannot take our message, our products, or our services to the world. Without enough money, we are slaves to the businesses we launched.

When Ernie offers me a new service, because it will make fast money, he hasn’t considered that it has nothing to do with what he wants his company to become or whom he wants his company to serve.

Part of the problem is bank balance accounting—looking at the money in your bank account as one pool from which you can operate your business without first addressing tax issues or your own salary, never mind profit.

1 percent allocation for the PROFIT account (Why 1 percent? You’ll find out in the next chapter), 50 percent for OWNER’S COMP, and 15 percent for the TAX account. Use quarterly adjustments to step up to higher percentages and nudge your business closer to the TAPs recommended in this book.

After setting up this new checking account at your bank, nickname the account PROFIT, and from this moment forward from any deposit you put into your normal checking account, transfer 1 percent of that deposit into your PROFIT account. Then proceed with your business and processes and money management as you have in the past. Just add to the PROFIT