For anybody who knows me well knows that this post is extremely rare and odd coming from me. However, I was recently introduced to a book called Profit First by Mike Michalowicz. Yes, mom I read a book. It teaches us as business owners to think about our profit and our income in a different way. Normally when we think about our money in our bank account we think income minus expenses equals profit. That whatever we have left over is how much we have to do whatever we want with.
This 11 chapter book explains an entire philosophy around the idea of looking at our money as income minus profit equals expenses. So, instead of your business telling you how much you have as profit at the end of the day your business is telling you how much you can afford for operating expenses. Which should in turn tell you how much spending you need to cut in order to have a healthy profit.
This book has completely changed my idea around how to run my photography business. When I was first introduced to this idea by a photographer friend I was completely on board there was no second-guessing the idea. I just went head first into this philosophy and implemented into my business procedures it right away.
After structuring my money in the way Mike suggests in the book, I quickly saw that I needed to cut back over $200 in business operating expenses. I was spending way too much for me to even be considered “profitable”. I’ve been able to see where my strengths are in my business and pushed myself towards growing those specific areas.
I don’t care what kind of business you have, you could be making things by hand out of your home, you can have a service-based business like me or have a brick-and-mortar. The Profit First philosophy can work for anybody and it’s designed to help your business grow bigger and faster. It will help you see exactly where your cash stands at any given moment and if you see a red flag you can dig into the complexity with a professional/qualified accountant or bookkeeper.
The book will go into further detail about why this works and how it works but think of it as the old timey way of using the envelope system. Where you’re setting money aside in specific envelopes that are meant for very specific things. Only the money you put in that envelope can go towards that trip or that grocery store run or that bill.
Even if you don’t like the idea of managing your money, you don’t like numbers at all or you don’t understand money period. This book can help you understand how to at least budget your business dollars and give yourself an idea of the actual profit of your business. Read the book, learn the philosophy and then talk to your accountant about so it they can manage that for you.