It's a question I've been asked over 100 times this year: "My business is growing, yet my pocket is emptier than it's ever been. What the heck is going on?"
I know that question because I asked it. Never out loud, mind you. I was too embarrassed. When I hit that first $100K, I thought I'd finally have something. When it didn't happen, I figured it would be at $500K. Nope. At $1M, not even close... I took a loan against my house to make payroll. Shoot, at $2M, I was on the verge of selling my house just to stay in business.
There's shame in that, and asking the question out loud was something I'd never have done. But I asked it of myself constantly in my head, and I dosed it with a healthy measure of self-hatred and disdain.
What I finally had to accept was the plain truth: I suck with money. I'm not wired for it.
You may have a question burning in your head too. One you're afraid to ask out loud. So let's tackle four of them right now. Then let's get super real, because I'll share one more that I've been afraid to ask myself out loud... until this article.
"I've never been profitable. How can I take profit first until my business is profitable?"
This sounds like a trick question. I mean, how the hell do you take something that's not there?
Profit isn't a result. It's an intention. You take it first, with intentionality, and it sets off a cascade of awareness. It forces you to reverse engineer the profit. You become acutely aware of the things standing between you and the profit you want. Take your profit first, and you see what's truly available to run your business.
The starting point is simple. On deposit day, before anything else happens, move a small percentage into a Profit account. Start at 1%. It's so small that you can keep running your business off the remaining 99%, just like you have been, with minor pressure. But for the first time in your business life, you'll see cash profit, no matter how small. Then, over time, move that 1% to 2%, then 3%, then more, until you've deployed the entire system. Each increase puts a brighter light on what isn't working in your business and what you need to fix.
The electric bill doesn't wait for leftovers
You've never once said, "I'll pay the electric bill if there's anything left at the end of the month." You pay it first, and you figure out the rest around it. Why? 'Cause the lights matter.
You already know how to do this. You've just never given yourself the same priority as the power company. (Ridiculous, I know. But true.)
Here's the other truth: your energy, the personal kind, only comes from a healthy, sustainable business. So take your profit first and never skip that "bill." Then, if there isn't enough left to pay everything else, that's your call to action. Profit isn't wrong. Something in your business is. Prices are too low. Margins are off. Unnecessary subscriptions are milking your money. Find the problem. Fix it. And always protect your profit.
"Every client makes me money. How can I fire one?"
A lil' ol' entrepreneur story for you. I'm keeping names confidential, because her clients are vulnerable people. They need their bills paid, and their loved ones aren't around to help. She serves them with her whole heart, and part of that is pro bono work. It was exhausting, and it was quietly eating away at her profitability, to the point that the business could no longer sustain it.
Then she started Profit First, and the numbers got loud. She couldn't deny the cost anymore. Her multi-million dollar business had her working longer hours than ever and paying herself less than a part-time job at a retail store. She was slowly, but surely, being broken.
An impactful business is a fiscally healthy business. They go hand in hand. But the nuance most people miss about Profit First is that it isn't a black-and-white call. It's about finding the profitable solution among all the opportunities you have. So she didn't drop the pro bono people to fend for themselves. She went looking for a way to care for them and to care for herself. The answer was sitting right in front of her.
About 95% of the pro bono work was technical, and the government makes specific funds available to pay for exactly that. So she subcontracted the technical work, using those funds. She kept the 5% that needs her talent and her heart: the oversight. She still volunteers. She just cut the cost of it by 95%. The demand on her time is dropping. Fast. Profit is accumulating. Faster.
Her heart is exactly where it needs to be. Her profit is exactly where it should be. The question Profit First illuminated was never "fire or keep." It was "where's the third door?"
"What if I'm the problem?"
This is the one people text me. Not email. Text. (If you can tell me how people get your cell number without you sharing it... that would be gold.)
The most recent version I got: "Mike, I think I'm the problem in my biz. I'm struggling to face that possibility. I wonder if I'm in denial, but I'm even denying that."
My gosh. I've never read a more honest sentence. Am I denying that I'm in denial?
Here's what I've learned. When you're the roadblock in your own business, it's almost never your character. It's your setup. I wasn't a guy with bad money intentions. I was a good guy with a bad system: all gut and mood. So do what I did. Bring on an accountant and bookkeeper to keep you on a cash accountability program (and my gosh, make it someone qualified, which is why I strongly suggest a Profit First Professional). Have them install the system with you. Have them hold you accountable. Have them be the strong, staunch money master when you're weak. (For me, that's basically daily.)
You'll find "the problem" shrinks to the size it actually was: a missing process.
And if you are the problem, don't try to fix yourself. People suck at change. Instead, install a method that covers your weak spots. Turn denial into awareness, and you build wealth.
"Isn't it too late to start a new system? I'm 14 years in and want out in 5."
Five years sounds like not enough time to fix anything. It's actually the best reason to start.
Run the napkin math. Every deposit, a slice goes to Profit. Every quarter, you take a distribution, and the rest stays in reserve to protect your company. Then in year 5, as you close the doors or hand over the keys, you get a big, final, fat check... for you.
Compare that to the plan most owners at your stage are on: hoping someone buys the business. Starting now benefits you two ways. First, profit builds your nest egg while forcing you to run a better business. Second, if you do sell, two things drive the value way up: a consistently profitable business (the buyer wants to make money too, and a cash ATM of a business draws buyers like a moth to a flame) and a business that runs efficiently and effectively, which Profit First forces.
You said you can't afford to risk it. You're right. That's why you start at 1%. The risk isn't in starting small. The risk is in five more years of the same plan.
And the one I was afraid to ask myself out loud until now: "Why am I still carrying the torch?"
Someone asked me, kindly: the Profit First book is done. Why keep going?
Confession time. I didn't set out to teach a money system. I set out to fix me. I was broke, embarrassed, and I mish-mashed together something that worked for someone wired like me. Profit First saved my sanity. I mean that.
I keep going because I know I'm not the only one. There's a trap in the entrepreneurial world: show weakness and you look unqualified. Why would anyone hire the person who's struggling? So we all act strong while we're drowning. It becomes embarrassing, and the embarrassment keeps us quiet.
Books reach maybe 10% of the entrepreneurs who could use them. So I do speaking, podcasts, media, coaching, investing, whatever format gets it to the rest. Shoot, if I could mind meld it into your brain, and it would truly serve you, I'd be game.
I'm not going anywhere, because most of the world hasn't heard of Profit First, and even more haven't tried it. I'll go on and on to give struggling entrepreneurs a fair shot at something that may serve them better.
The pocket, revisited
Remember the owner with the bigger business and the emptier pocket? Nothing was wrong with them. The money was moving through. No one had told it where to stop.
This week, write down the one question you've been avoiding. Then say it out loud to one person, or email it to me at Mike@MikeMichalowicz.com.
That's the whole first step. Not a rebuild. Just one honest question, out loud. I'm listening.
Better yet, say it to a Profit First Professional. They've heard it before. They are listening and serving up the solution.
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