How to Start Making a Profit Today

Ah Profit.

Once a dirty word, I think by now you’re learning that profit sustains and grows businesses. Sure, you generate revenue, and on paper, the numbers might even look good. But the real question is – how much of that revenue do you actually keep?

If you’re like most business owners, the answer is: not enough.

Too many businesses live in a cycle of feast and famine, where revenue comes in, expenses swallow it up, and what’s left? Not much. This isn’t a sustainable way to run a business. If your business isn’t putting profit first, you’re stuck in a survival mode that keeps you from scaling, thriving, or even just breathing easy at night.

That’s why I created the Profit First Instant Assessment. It’s a simple yet powerful tool that gives you a clear, no-BS look at your real profitability and what you need to do to fix it.

The Problem with traditional accounting

Most businesses operate under the traditional formula:

Revenue – Expenses = Profit

This makes profit an afterthought and something that might be left over after you’ve covered all your expenses. But if we’re being honest, what usually happens? The money’s gone before you get to profit. You reinvest in the business, cover unexpected costs, or just keep treading water.

Profit First flips that formula on its head:

Revenue – Profit = Expenses

With this method, you take your profit first, right off the top, so you’re forced to run your business on what’s left. And trust me, it works. I know because I did it for my businesses.

Step 1: Run the Profit First Instant Assessment

Before you make any changes, you need to know where you stand. The Profit First Instant Assessment helps you determine how your business is actually allocating money.

Here’s how you do it:

Look at your last 12 months of revenue. Find your total revenue – that’s every dollar that came into your business.
Break it down into four key percentages:
- Owner’s Pay (What you paid yourself)
- Profit (Money set aside for profit)
- Taxes (What you’ve saved for taxes)
- Operating Expenses (What it actually costs to run your business)
Compare these numbers to the Profit First Target Allocation Percentages (TAPs). These benchmarks help you see if you’re over- or under-allocating funds in any category.

Step 2: Analyze Your Results

Once you’ve got your numbers, take a good look. If your Owner’s Pay is too low, you’re underpaying yourself. If your Operating Expenses are too high, your business is likely spending beyond its means. If there’s no real profit allocation, you’re running on fumes.

This is where reality sets in. Many business owners realize they’re not running a truly profitable business – they’re just getting by. But here’s the good news: once you know where you stand, you can fix it.

Step 3: Adjust Accordingly

Your Profit First Instant Assessment is your wake-up call. Now, it’s time to make adjustments:

Start small. You don’t have to overhaul everything overnight. Begin by reallocating 1% of revenue to your Profit account. It may seem tiny, but it’s about building the habit.
Trim expenses. Look at where your business is bleeding money. Are there subscriptions you don’t need? Services you can renegotiate? Find ways to reduce costs without sacrificing value.
Pay yourself first. Too many entrepreneurs underpay themselves. Adjust your Owner’s Pay to be in line with sustainable TAPs.
Set up separate accounts. Have dedicated bank accounts for Profit, Owner’s Pay, Taxes, and Operating Expenses. Automate transfers to ensure you’re prioritizing correctly.

Why This Works

Profit First forces discipline. It takes the mystery out of cash flow and ensures you’re building a financially healthy business. When you run a Profit test regularly, you stay ahead of financial issues instead of scrambling to fix them after the fact.

Your next step

Running a business without knowing your real profitability is like driving blindfolded. The Profit First Instant Assessment gives you clarity and control.

Run your numbers. Adjust accordingly. And start keeping more of what you earn.

Need help? Download the Profit First Instant Assessment worksheet and take the first step toward a truly profitable business.

It’s time to stop hoping for profit and start ensuring it.

You’ve got this!

-Mike

PS –

Get in touch with a Profit First Professional

Become a Profit First Professional

The post How to Start Making a Profit Today appeared first on Mike Michalowicz.

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Ah Profit.

Once a dirty word, I think by now you’re learning that profit sustains and grows businesses. Sure, you generate revenue, and on paper, the numbers might even look good. But the real question is – how much of that revenue do you actually keep?

If you’re like most business owners, the answer is: not enough.

That’s why I created the Profit First Instant Assessment. It’s a simple yet powerful tool that gives you a clear, no-BS look at your real profitability and what you need to do to fix it.

The Problem with traditional accounting

Most businesses operate under the traditional formula:

Revenue – Expenses = Profit

This makes profit an afterthought and something that might be left over after you’ve covered all your expenses. But if we’re being honest, what usually happens? The money’s gone before you get to profit. You reinvest in the business, cover unexpected costs, or just keep treading water.

Profit First flips that formula on its head:

Revenue – Profit = Expenses

With this method, you take your profit first, right off the top, so you’re forced to run your business on what’s left. And trust me, it works. I know because I did it for my businesses.

Step 1: Run the Profit First Instant Assessment

Before you make any changes, you need to know where you stand. The Profit First Instant Assessment helps you determine how your business is actually allocating money.

Here’s how you do it:

Look at your last 12 months of revenue. Find your total revenue – that’s every dollar that came into your business.

Break it down into four key percentages:

Owner’s Pay (What you paid yourself)

Profit (Money set aside for profit)

Taxes (What you’ve saved for taxes)

Operating Expenses (What it actually costs to run your business)

Compare these numbers to the Profit First Target Allocation Percentages (TAPs). These benchmarks help you see if you’re over- or under-allocating funds in any category.

Take your assessment here.

Step 2: Analyze Your Results

Once you’ve got your numbers, take a good look. If your Owner’s Pay is too low, you’re underpaying yourself. If your Operating Expenses are too high, your business is likely spending beyond its means. If there’s no real profit allocation, you’re running on fumes.

This is where reality sets in. Many business owners realize they’re not running a truly profitable business – they’re just getting by. But here’s the good news: once you know where you stand, you can fix it.

Step 3: Adjust Accordingly

Your Profit First Instant Assessment is your wake-up call. Now, it’s time to make adjustments:

Start small. You don’t have to overhaul everything overnight. Begin by reallocating 1% of revenue to your Profit account. It may seem tiny, but it’s about building the habit.

Trim expenses. Look at where your business is bleeding money. Are there subscriptions you don’t need? Services you can renegotiate? Find ways to reduce costs without sacrificing value.

Pay yourself first. Too many entrepreneurs underpay themselves. Adjust your Owner’s Pay to be in line with sustainable TAPs.

Set up separate accounts. Have dedicated bank accounts for Profit, Owner’s Pay, Taxes, and Operating Expenses. Automate transfers to ensure you’re prioritizing correctly.