That's a massive question and a huge promise! There are so many small businesses in the US and Canada. Why do so many fail? What's the solution? That is exactly the problem that Mike Michalowicz tries to tackle in the excellent book called Profit First.

Here is a quick summery of his key ideas.

Quick Take
Revenue doesn’t equal profit.
If you don’t take profit first, you’ll always spend what’s left.
So flip the formula—take profit first, then run your business on the remainder.

The Lie Most Business Owners Believe

Most business owners operate on a simple formula:

Sales – Expenses = Profit

On paper, it makes sense. In reality, it almost never works.

Why?

Because expenses always expand to consume whatever is available.

If your business brings in $50,000 this month, you’ll find a way to spend $49,500.
If it brings in $100,000, suddenly your expenses “need” to be $95,000.

More tools. More subscriptions. More hires. More overhead.

And at the end of it all?

Little to no profit.

That’s the trap.

The Core Idea: Flip the Equation

Profit First introduces a simple but powerful shift:

Sales – Profit = Expenses

Instead of hoping there’s something left over…

-You take your profit first.
-Then you run your business on what remains.

This forces discipline. It forces clarity. And most importantly—

It forces you to build a business that actually works.

Why This Works (Behavior > Math)

This system isn’t about accounting—it’s about human behavior.

Think about it like this:

If you open your fridge and it’s packed → you eat more
If it’s nearly empty → you become resourceful

Your business works the same way.

When you see a big bank balance, you relax your standards:

“We can afford it”
“Let’s just get it done”
“We’ll make it up next month”

But when money is tight (by design), you:

Cut unnecessary expenses
Negotiate better
Focus on high-value work
Say no to low-margin jobs

Constraint creates clarity.

How the System Actually Works

Profit First uses a simple structure of separate accounts:

Income Account – All revenue goes here first
Profit Account – Your profit (non-negotiable)
Owner’s Pay – What you actually take home
Tax Account – So taxes never surprise you
Operating Expenses – What’s left to run the business

Every time money comes in, you allocate percentages to each account.

Example:

5% Profit
50% Owner’s Pay
15% Taxes
30% Operating Expenses

(Exact numbers vary depending on your stage.)

What Happens When You Do This

At first, it feels tight. Maybe even uncomfortable.

That’s the point.

You start asking better questions:

“Do we actually need this?”
“Is this job worth taking?”
“Can we charge more?”
“Can we do this more efficiently?”

Instead of growing your business by doing more…

You grow it by doing better.

Real-World Application (Especially for Trades & Service Businesses)

For a handyman or construction business like yours, this is where it gets powerful:

You Stop Chasing Bad Jobs

Low-margin work becomes obvious—and avoidable.

You Price with Intention

Instead of “what will they pay?” → it becomes
“what do we need to be profitable?”

You Build a Cash-Strong Business

No more wondering where the money went.

You Reduce Stress (Massively)

Profit isn’t an afterthought—it’s guaranteed.

The Big Shift: From Survival to Control

Most businesses operate in survival mode:

More jobs = more problems
More revenue = more chaos
More growth = less profit

Profit First flips that.

Now:

Profit comes first
Expenses are controlled
Growth is intentional

You’re no longer reacting…

You’re running the business.

Final Thoughts from the book

Mike really brings home a truth that I can absolutely attest as true;

“Your business will always spend what’s available.”

This I find to be true even in personal finances. My wife and I have started emplamenting this by taking out what we want to save from each pay check FIRST before we do anything else. It has dramatically helped us.

So, says Mike, take your profit first.
Then build a business that can thrive on the rest.

Forum Discussion