Welcome to Part 2 of our Wheel of Business Success series. In this post, we dive deep into one of the most transformative financial frameworks for small businesses: Profit First by Mike Michalowicz. If you’ve ever struggled to consistently turn a profit, no matter how hard you work, you’ll want to keep reading.
But before we dive in, let’s quickly recap the first part of the series, Built to Sell, and how it connects to the bigger picture of achieving sustainable profit and growth.
In The Wheel of Business Success: Part I, we introduced the core of our business philosophy: profit and growth. These concepts are central to our approach, as they represent the ultimate goals for every small business. Surrounding these goals are four key components that every business must focus on: people, performance, strategy, and scale.
Each of these components has its own drivers. For example, under “people,” we focus on the Hub and Spoke Principle and the Switzerland Structure—two concepts that emphasize business autonomy and avoiding over-reliance on any single employee, customer, or vendor. In the “strategy” section, we explore Monopoly Control (how strong your niche is) and Recurring Revenue (how consistent your cash flow is).
Now, let's turn to one of the most important aspects of the wheel: cash management, and that’s where Profit First comes in.
The idea behind Profit First is deceptively simple: make profit a priority from day one. Too many businesses operate under the assumption that profit is whatever is left after paying expenses, taxes, and employee wages. But what if, instead of treating profit like a distant goal, you made it a non-negotiable part of your financial strategy?
Mike Michalowicz’s Profit First framework is a revolutionary approach that changes how business owners think about money. By flipping the traditional budgeting method on its head, Profit First ensures that profit is taken first, forcing you to run a leaner, more efficient business.
Here’s how the Profit First system works:
Take Profit Off the Top:
For every dollar your business earns, immediately set aside a percentage as profit. Instead of paying expenses first, you prioritize profit.
Pay Yourself First:
As a business owner, you should always compensate yourself. After setting aside profit, determine a percentage to pay yourself consistently.
Set Aside Taxes:
Allocate a portion of revenue for taxes so you’re never scrambling at year-end to pay the IRS.
Use What’s Left for Operating Expenses:
The remaining revenue becomes your operating budget. By limiting yourself to this amount, you force your business to run more efficiently, eliminating unnecessary expenses.
This method does more than guarantee profit—it reshapes how you manage your finances, pushing you to make smarter spending decisions. Instead of operating with excess, you’ll learn to operate lean and grow sustainably.
Most small businesses fall into the trap of thinking profit will come “someday.” The reality is, if your business isn’t profitable now, bringing in more clients or sales won’t fix the underlying financial habits holding you back.
Profit First helps you break this cycle. By prioritizing profit and structuring your finances accordingly, you ensure consistent profitability, even during lean times. You stop depending on hope and start building a business that thrives no matter what.
In our Wheel of Business Success graphic, Profit First falls under the category of cash management, a critical factor in both performance and scale. Managing cash flow effectively is the foundation for any successful business, and Profit First ensures that profitability is baked into your operations from the start.
This framework directly impacts two of our key performance drivers: financial performance and the valuation teeter-totter. Businesses that prioritize profit upfront are not only more financially secure but also more attractive to potential buyers and investors.
Here’s the transformational aspect: implementing Profit First allows you to take control of your finances instead of being controlled by them. It eliminates the feast-or-famine cycle that many business owners face. You create a sustainable financial model that guarantees profitability, making scaling and long-term growth possible.
When you adopt the Profit First mindset, you regain control over your expenses and start building a business that works for you.
Now that you understand the power of Profit First, it’s time to take action. Here’s what you can do right now to start transforming your business:
Purchase a Copy of Profit First:
Get your hands on Profit First by Mike Michalowicz. Whether you prefer a physical copy or audiobook, this book will reshape your financial mindset.
Schedule a Discovery Call:
Interested in implementing Profit First in your business? Schedule a discovery call with us. We’ll guide you through the process and show you how to tailor it to your specific situation.
Download Our Free Ebook:
Download our free ebook, The Eight Key Drivers of Company Value, to learn how to use Profit First profits to create lasting business value.
Profit First is more than a financial strategy—it’s a business revolution. By prioritizing profit from day one, you set your business up for long-term success. Once you master profitability, everything else—scaling, customer satisfaction, and more—becomes easier to achieve.
Don’t wait for profit to “happen.” Take control and make it happen with Profit First. Your business will thank you for it.
Ready to start?
Purchase the book, schedule a discovery call, and download our free ebook today!