My business is extremely profitable.
I know this, because I’ve designed it to be that way.
How? I’m not exactly a finance whiz and I’m not better at willpower or budgeting than the rest of us.
However, I was lucky enough to hop on the Profit First band-wagon early in my entrepreneurial journey.
Profit First is Mike Michalowicz’s brilliant system that harnesses the quirks of human psychology to work FOR us in how we manage cash flow in our businesses.
I won’t unpack it all here, but in basic terms, it’s based on the premise that “demand for something expands to match its supply.”
Conversely, artificially restricting supply inspires us to get creative in reducing our demand.
For example: Think of the massive creativity and resourcefulness you unleash when you’re almost out of toothpaste.
Most of us will go to great lengths to smoosh those last little nuggets out of the tube. Then the next day we’ll get even more creative to find the miracle of just a little bit more.
You’d never be that resourceful and conservative with a FULL tube.
Profit First helps me divide the income entering my business in a smart way that activates my “toothpaste-almost-empty” motivation state.
I consistently and systematically set aside my profit BEFORE I pay my bills, and in doing so, I help make sure my expenses never outgrow what I can actually afford.
Like, actually afford. Including saving for taxes and stuff.
That’s all the details I’ll give you today, but I HIGHLY recommend you read the book and implement it in any venture you’re a part of.
Profit First has become so important to me that I can’t stand not using it.
Case in point: I started my Airbnb business without any Profit First systems in place.
I made it about ONE month before the lack of structure drove me crazy and I had to set them up.
Now I rest easy in both businesses knowing I’m making wise, adult choices about saving, spending, and taxes.
I know that any profit coming in is actually PROFIT I get to fully enjoy.
Bottom line: If you’re managing cash flow, learn about Profit First. You’ll thank me — and yourself — later.
PS – I’m putting my money where my mouth is on this recommendation: For a limited time, I’ll mail you a free copy of “Profit First” if you promise to read it within the next 2 months. Just hit reply and tell me where to send it.
This post was originally sent as an email to the Magic Words of the Week newsletter list. Every week, I share reflections on a word, quote, or phrase I think will help you thrive in your life’s work.