Episode Details

Is your agency profit where it should be? (Hint: net profit should be at least 30%) Are you constantly struggling with cash flow? Do you always pay yourself last, or not at all? Solve all these problems and actually enjoy running your business again when you apply the principle of Profit First.

In this episode, we'll cover:

• What agencies are doing wrong with their cash flow.
• Why businesses should put profit first.
• 3 basic steps of putting profit first.

We've got a repeat guest today, Mike Michalowicz who is an entrepreneur and the author of six business growth books. I had him on the show previously talking about his book Clockwork: Design Your Business to Run Itself. Then recently, we used his Profit First theory as a workshop in our Agency Mastermind and I knew I had to get him on the show again.

Mike got his start as an entrepreneur who was very successful very early in his career. His early success led him to other investment opportunities which left him feeling unstoppable and invincible. He had multiple homes and expensive vehicles... but, in hindsight, his own ego and arrogance got in the way.

He says he never had a real pulse on his business finances and little care to know any details his accountant shared with him. So, in 2008 he had no idea his businesses were failing until his accountant called to tell him it was time to declare bankruptcy. Within a month he and his family if five lost their cars and homes. After a couple years of feeling sad, sorry, and insignificant Mike decided to become an author writing about his experienced with a new goal to eradicate entrepreneurial poverty.

What Agencies Are Doing Wrong With Their Cashflow

Typically, agencies (and for that matter, all businesses) are doing a bank balance accounting method. Your accountant tells you to look at income statements, P&L statements, balance sheets, etc. which can get mind-numbingly boring. And all you care about is the bottom line, right?

That's because we're trained to think: Sales (minus) Expenses = Profit

And that "bottom line" is your profit. So that's where your attention is focused because that's what matters most.

But Mike challenges us by asking, why is the thing we care most about falling to the bottom of the list. Think about it. Don't we always put the most important items at the top of our list? It's backward and wrong that profit is just considered "what's leftover" after everything else.

Why Businesses Should Put Profit First

Mike's formula for putting profit first is important because it means you are making money. It's human nature that the goals we put first are the ones we get done. That's why so many people work out in the morning. What comes first is what gets done.

Look, as a society, we are always asking other business owners "How big is your business?" and that's because we care most about revenue. But, you can have a huge business and not be profitable at all. What we should be asking is, "How healthy is your business?"

So many agencies are living check to check. They're most concerned with top-line revenue instead of profitability. But when you get into a situation where you can't pay vendors or worse, can't pay your employees does topline revenue even matter? No.

Putting profit first flips the formula: Sales (minus) Profit = Expenses

3 Basic Steps of Putting Profit First

I know what you're thinking and it's a little more than just pulling profit out first.

1. Stop making excuses and give it a shot.<