Hey Square Readers,
We hope you had a great time reading Profit First by Mike Michalowicz with us. We had some really great discussion threads, and a wonderful live video chat discussion! Thank you all for participating and making the Square Readers Book Club a welcoming and helpful place.
So we’re here now to bring it all together with a full book and discussion summary, with the parts that you all found to be the most important. And if you didn’t get a chance to read the book, here’s a chance to get the shortened version. Let’s dive in!
Book Summary
Profit First by Mike Michalowicz is all about getting your business finances in order, and making sure your business is profitable, and that you are getting paid. It focuses on the idea that the traditional accounting methods don’t line up with how businesses actually run. A lot of businesses may look profitable in a P&L statement, but at the end of the year there’s no money actually leftover and the owner hasn’t taken a salary.
The author sets forward his Profit First system which divides up a business’ income into separate accounts to put aside money for each category and ensure you can pay yourself and have profit left over. This also forces you to create an expense budget, which can help you spend less with a smaller amount of money available for expenses that you can actually afford.
Setting up the accounts and putting aside money for profit is only half of the Profit First equation, the other half is doing the work to actually cut expenses. The author recommends trying to cut at least 10% of expenses, and suggests getting creative to find ways of saving money long term.
Discussion Summary
We used our Book Club discussion threads to take the theories from the book and see how you all put them into practice in your businesses.
We kicked things off with a baseline conversation about how your finances are doing before reading the book. You told us whether or not your businesses are profitable, and how you handle your cash flow. This set the groundwork to understand your finances before starting to learn and implement the Profit First system from the book.
Next we laid the foundations of the Profit First plan to see where it came from. We covered what profit actually means, why it’s important, and what leads to businesses being unprofitable. We laid out that being profitable means operating without debt and having cash reserves left after all expenses. We discovered that a lot of businesses end up in the Survival Trap of chasing profit but instead leading into inherently unprofitable ventures.
Then we dove into the meat of things, detailing the core principles and the first round of steps to actually implement Profit First into your business. These principles and steps boil down to putting less money towards expenses to force yourself to cut down on expenses, setting aside profit first, having separate accounts for spending categories to remove temptation, and doing all of this on a regular schedule to spot trends. Sellers like you shared their experiences in implementing these steps to see how it all works for them. Check out the post for the full details!
After that, we moved on to the next steps of the system, running the Instant Financial Assessment, and determining what percentages to allocate for each account. The assessment helps give you a baseline of where your business spending is, and helps to determine the goal percentages to allocate for each of the spending categories. Seeing the difference between where you are and where you need to be can be very helpful, and the author lays out strategies to get to that goal.
The next step of the system is cutting expenses. So we shared general strategies along with specific examples of how folks have cut down on business costs to get closer to those profitability goals.
Then we got into some of the Advanced Steps to customize the plan to fit better into your own business. This mostly involves adding new accounts to the mix to fit the things that you spend your money on, but also dives into being more efficient by focusing on meeting the needs of your best customers.
And finally we finished off our discussion threads by talking about the impact that implementing Profit First has had on your businesses, with folks sharing the benefits they’ve felt!
We also shared some other books written and created by the author if you want to keep the knowledge flowing, including our book for October & November 2023, Fix This Next!
@TheRealChipA shared more of his experience using and tailoring the Profit First system to his business. It's a great read, and sure to spark ideas for you!
Live Discussion
We held our Live Discussion on Tuesday February 27th. If you’d like to catch up, you can watch the recording here:
It was a really great discussion, and thanks to everyone who joined us! We kicked off with some well needed considerations around taxes. It’s important to make sure that the bank accounts you use are all in the business’ name, and to check with a tax professional to make sure they can easily track your spending to make sure you’re in compliance. We talked more about the pros and cons of having separate accounts, and similarities to the Envelope System of personal finance, and alternatives that may work for some business owners.
Some sellers shared how just in the first month or two of working on implementing the Profit First system has made a big impact on their business. One shared that running the Instant Assessment was a big wakeup call to really get serious about cutting down on spending and putting aside money for paying yourself. We also talked about the importance of budgeting and cutting down on expenses, and doing what you need to in order to keep your business out of debt.
Watch the video above to see more of the great discussions.
Overall, it was a wonderful call, and we hope to see even more folks in the next one!
Next Book
We’re starting our next book, Worth Every Penny by Sarah Petty and Erin Verbeck, on Monday March 4th, with the next Live Discussion on Tuesday April 30th. We hope to see you there!
Your Thoughts
I’d love to hear more of your thoughts on this book and overall the experience of our Square Readers Book Club!
- Was this book’s system helpful? What did you get out of it?
- What are you looking forward to with the next book?
It’s never too late to jump into any of our discussion threads and join in on the conversation!
Paying it Forward
If you’re all done with the book and are looking for something to do with a copy you bought, I highly recommend paying it forward. Give it to another local business owner, or donate it to a local used bookstore, community center, library, Little Free Library, or anywhere else, so someone else can benefit from it.
Thank you so much for all of your participation and discussion throughout the last two months! A big shoutout to some of our most active members: @bonny, @DinaLRosenberg, @Doran, @TheRealChipA, @Lovewell, @Stacelyn24, @BofBArtStudio, @HC_Charlie, @SavasFineArt, @CareyJo, @Bronze_Palms, @Smellthis1919, @MudFire_Dex, @JUYBoutique20, @Tamyra_Paunchy, @MattisonCentral, @alexandriak, @Candlestore, @JAP21, @sugarlab, @CJuareznails, @Venus1111, @Anjoli, @GoalGetter, and more!
We hope you read the next book with us, Worth Every Penny by Sarah Petty and Erin Verbeck!
Can’t wait to read more with you,
Pesso
