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  • Donna Lim

Diving Head First Into Profit First

Note from Donna…. In 2019 and 2020 I did a series on Mike Michalowicz’s book Profit First. At the time it was because many of my clients were reading the book and asking me questions. It was natural to do a series on the book. What I didn’t see coming was that I would really dive in and wind up drinking the Kool-aid.

Dive in I did. I started with Mike’s challenge to just do 1% while reading the book. That turned into moving 12% into a savings account. I didn’t have all the accounts yet. I was just setting aside money. I was trying it out and seeing if I could run my business on a “smaller” plate.

It did what it was supposed to do – forced me to look at my expenses and make decisions about what we needed to run the business on a smaller budget. I made decisions like – sorry Capital Club of Silicon Valley – I can’t afford you right now.

Long story short, I’ve now dived headfirst into Profit First and I’m working on becoming certified in the Profit First Ways. It requires me to do all the steps of Profit First. I thought I’d dig out my newsletter series on the book and refresh what I’m learning. Why don’t you join me?


The first chapter in Profit First is about the cash-eating-monster. Here are a few tidbits I liked from this chapter.

“No matter how much talent, ingenuity, passion or skill you have – nothing changes the fact that CASH is still king.” To this statement I agree to the moon and back. This goes back to things I’ve said many times over. You need a spending plan. This is what anchors you to the reality of your situation.

I’m currently reading Profit First For Real Estate Agents – 2 things Damon Yudichak says over and over in the book: 1. Pay yourself first and 2. Spend less than you make. Again, the theme is controlling your cost. The Profit First system is all about paying yourself and then deciding what the business can afford.

September is budget month at Sooter Consulting Inc. My process is to forecast my recurring revenue. Once I have that forecast, I now know how much I have to spend. Then I work with my payroll … how much will my team cost me and then I start with the rest of the expenses. Most assuredly I will not be balanced. That’s where the tough decisions come into play. I have to make a decision on where to cut spending to balance the cash.

You can say… the difference is what I need to GROW my business. That comes to another snippet of greatness from the first chapter – “Colossal growth without financial health will still kill your company”. In other words, growth does not solve your Cash problems. Growth always comes with expenses – so the hamster wheel you are on.

Mike talks about top line revenue being the enemy of business owners. Top line revenue does not guarantee money in your pocket. My philosophy has always been – it’s not about the size of your company – it’s about how much you get to keep in your pocket. So don’t think you have to grow, grow, grow… think more about what the right size business is for you and how you can get it to provide the lifestyle you want.

Mike says a few more things that I like. “Profit is a habit”, “Revenue is vanity, profit is sanity and cash is king” , and “Sustained profitability depends on efficiency”.

In the next few months, as I dive into putting the entire system into place, I will report on my successes and my failures. I think it’s important to share both as this process is not easy for anyone.


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