(Quoted from Marshall Atkinson and Impressions Magazine. Full article here.)
A new movement is happening for small businesses that deals with how they handle banking.
While accounting practices may seem fairly dull to most people, a book by Mike Michalowicz titled “Profit First: Transform Your Business From a Cash Eating Monster to a Profit Making Machine” has everyone talking. According to Ron Saharyan with the “Profit First Professionals” group, about 75,000 small businesses globally are on this path. Is your shop?
The premise of the book is to change how most businesses handle their money. The conventional accounting method for operating any business is to deduct expenses from sales to calculate profit (Sales – Expenses = Profit).
Profit First flips that. Michalowicz’s formula calculates expenses by deducting profit from sales (Sales – Profit = Expenses).
That’s right — as the business owner, you pay yourself first. The company operates daily from the remainder.
Does this method sound reasonable? Just as dieters can use portion control to lose weight by eating from smaller plates, businesses can enhance their ability to build more profit if finances are limited.
It’s a very interesting premise. But does it work?
Let’s explore the Profit First phenomenon in the decorated-apparel industry and get thoughts on the method from industry veteran Mark Coudray, a certified Profit First Professional who has been helping shops with implementation.
Click here to read the full article