Profit First is a cash management system developed by Mike Michalowicz. The goal is right in the name; we take profit BEFORE paying for expenses. Businesses are “always profitable” under this system not necessarily because they make more money, but because they prioritize differently.
Profit First consists of having several bank accounts with specific purposes. One account is the Profit account. Profit First is about paying yourself first, so when you collect on production, you always take a certain percentage as profit. The rest is for expenses. You will also have a tax account and an owner’s pay account when using the Profit First system, but the one to really pay attention to is the Operating Expenses (OPEX) account.
The goal of Profit First is to give you a simple system to know the health of your business at any given moment and to ensure that you have a business that is not only profitable but pays you what you deserve.
Since you’re taking profit before paying expenses, the system forces you to evaluate your expenses. What expenses are absolutely necessary to provide your services, which make it easier to provide service, and what is just extra/unnecessary expense. By taking your profit first, your expenses take the financial hit, not you. For more information, you can go to Mike Michalowicz’s website: https://mikemichalowicz.com/profit-first/