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From the CEO Bookshelf

Review By: Mark Kleinschmidt

Profit First  By: Mike Michalowicz

Michalowicz’s book presents an innovative look at the financial management of your business. As the title suggests, he puts profits first. One might assume that prioritizing profit is an obvious business strategy, but most businesses follow the traditional accounting formula of Sales – Expenses = Profit. The author proposes a compelling new method: Sales – Profit = Expenses, which as the name of the book implies, puts profit first. He also debunks the myth that a business must be big to be profitable.

The book takes complex financial concepts and puts them in easily understandable terms and  provides real life examples. The core of Profit First is a unique system that prioritizes profitability by first focusing on revenue and profit before contemplating expenses. He presents the concept of allocating profit into a separate account on a percentage basis for every dollar of revenue. He also suggests separate accounts for taxes, payment to the owners and operating costs. This approach requires discipline, eases financial management, and most importantly, increases profitability.

Profit First is a refreshing departure from more traditional finance books which can often be dry and very academic. It maintains a good balance between theory and practical implementation, making it a comprehensive guide for business owners across all industries.

You may think Michalowicz’s approach is a bit radical or unfeasible, which might be the case for larger businesses with complex financial structures. But it could fit very nicely into a small business. It challenges traditional financial practices and offers an alternative way to look at your business that can significantly improve your company’s profitability.

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