Simply put, the Profit First system flips the accounting formula. To date, entrepreneurs, CEOS, freelancers, everyone in nearly every type of business has been using the “sell, pay expenses, and see what’s left over” method of profit creation. This ingrained belief has us sell first, then pay expenses, and let the profit take care of itself. Which it rarely does, because the profit is what’s left over. An afterthought. Profit surely isn’t baked into the daily operations. For many entrepreneurs, profit is only considered after the fact. Sometimes monthly. Sometimes quarterly. And way too often, annually, when their accountant is preparing the tax returns.
The Profit First Flip
Traditional GAAP (Generally Accepted Accounting Principles) accounting is:
Sales – Expenses = Profit
Unless you have an accounting degree, GAAP is probably going to look like a foreign language. It’s complicated. And when was the last time you considered what GAAP says before you made a business decision? This doesn’t work for most business owners.
Profit First flips the formula – the math still works out the same, but how we see it changes. The Profit First formula is:
Sales – Profit = Expenses
Instead of profit being an afterthought, it’s brought front and center. Now it’s your expenses that are left over. We will work together to bring that formula in balance.
Have debt? Don’t worry, you can still (and NEED TO) implement Profit First. We’ll develop a plan to pay down debt, while still creating more profit in your business. Honestly, that’s the only way to pay down your debt.