Profit First by Mike Michalowicz ( 9 key Lessons Plus Book Summary)

Profit First by Mike Michalowicz was created to give you a zero-BS guide to flip the traditional accounting formula for better business management.

He didn’t come up with this method from thin air.

He had built and sold multi-million-dollar businesses, then went broke. Flat broke. It wasn’t until he realized he had been running his businesses the wrong way ( same as most new entrepreneurs ) by just working and hoping profit would magically show up “one day”. Then he created a better way.

The change?
“Sales – Profit = Expenses.”
Not the other way around.

This book was written for people running a business, or a side hustle or those still planning to start one.

Mike’s system helps you keep your money, not just make it. You’ll finally feel like you’re building something solid, not just surviving.

Let’s break down 9 simple lessons that can help you run a profitable business from day one.

Table of Content

Detailed Summary of Profit First by Mike Michalowicz

“Your business is not a cash-eating monster. It’s a money-making machine. You just haven’t treated it that way.”

In Profit First, Mike Michalowicz flips the script on traditional accounting. He says the old way—sales minus expenses equals profit—keeps you broke. So he offers a new formula: sales minus profit equals expenses.

You take profit first. Always. Then you make the rest work.

He created this method after selling two companies, blowing all the money, and realizing he was great at making revenue but terrible at keeping it. And he’s not alone. If you’ve ever made money but still felt broke, this system is for you.

Mike gives you a step-by-step method:

Open five business accounts: Income, Profit, Owner’s Pay, Tax, and Operating Expenses.
On the 1st and 15th of every month, transfer money based on fixed percentages.
Always send profit first—even if it’s just 1 percent.
Cut expenses to fit what’s left.

He uses simple ideas like “use a smaller plate” to explain how constraint fuels creativity. You learn to run lean. You stop hoarding tools, wasting on ads, or hiring before you’re ready. You pay yourself first. You stop surviving. You start owning.

And even if you don’t have a business, you can still apply it to your personal finances. This isn’t about theory. It’s a habit shift. Profit becomes the default, not the leftover.

Profit First by Mike Michalowicz (Book Summary)

9 Lessons from Profit First by Mike Michalowicz

“Profit is not an event. It’s a habit.” That one line from Mike Michalowicz will either make you uncomfortable or wake you up.

Most business owners wait to grow before they ever think about profit. Mike says that’s the problem. He believes you should build for profit from day one. Here are 9 lessons from Profit First that will help you do just that.

1. Flip the formula: Sales − Profit = Expenses

This is the core of everything. He says stop using the old-school formula (Sales − Expenses = Profit). That one keeps you broke.

Take your profit first. Even if it’s just 1%.

That small habit shifts the way you make decisions. Instead of trying to pay yourself from what’s left, you run your business with clarity.

You stop asking “Can I afford to pay myself?” and start asking “What can I afford to spend after I’ve paid myself?”

2. Use smaller plates

When you reduce how much cash is available to spend, your expenses naturally shrink. It’s the same way you eat less when your plate is smaller.

Mike recommends splitting your income into accounts:

Profit
Owner’s Pay
Taxes
Operating Expenses

Profit First by Mike Michalowicz (Visual representation of income split into smaller business accounts)

The smaller your OPEX account, the more creative you get with your spending. And you won’t even feel it once it becomes routine.

3. Set up bank accounts, not spreadsheets

He doesn’t want you managing this in a spreadsheet or budget app. He wants you to feel the constraint.

Create real bank accounts for each purpose. When you log into your banking app, you’ll see what you actually have to spend, and what needs to be protected.

It forces you to respect your allocations.

4. Pay yourself first

This is non-negotiable.

Profit First by Mike Michalowicz (Small business owner smiling at a phone notification of a payment)

You started your business to gain freedom. That starts by paying yourself a fixed percentage from every sale.

Mike says most small business owners starve themselves while overfeeding their expenses. You end up resenting the business.

But when you get paid first, even a little, your motivation changes.

5. Don’t trust your willpower

He doesn’t expect you to be perfect. That’s why he builds friction into the system.

Move your profit and tax money to a separate bank.

Make it harder to “borrow” from those accounts. This one step protects your future. Out of sight, out of mind.

6. Check your money rhythm twice a month

Most business owners avoid their numbers. Not because they’re lazy, but because the numbers don’t make sense.

Mike says you only need to look at your bank accounts twice a month.

Profit First by Mike Michalowicz (Bi-monthly routine of checking and allocating income visually shown)

On the 1st and 15th, you transfer income into each account using preset percentages.

This gives you clarity without overwhelm.

7. Raise your profit percentage over time

Start small. Even 1%.

Then, every quarter, increase your profit allocation by 1%. Cut operating expenses by 1%.

You’ll be amazed at how quickly you build a real cash buffer. And you’ll finally have money to enjoy or reinvest.

8. Use quarterly profit distributions for YOU

Every 90 days, take 50% of the money in your profit account.

This is yours to spend guilt-free.

Take your family out. Buy something nice. Save it for a trip.

Profit First by Mike Michalowicz (Entrepreneur enjoying a quarterly profit reward from their business)

This reward system gives you a reason to keep going. It also shows you what’s possible when profit becomes a habit.

9. If you can’t pay your bills after profit, your business is broken

This one hurts, but it’s the truth.

If your expenses don’t fit what’s left after taking profit, you have to cut costs or increase sales. Period.

Mike doesn’t sugarcoat this. He says you’re not in business to cover expenses. You’re in business to build wealth.

If you want to run a business that actually pays you and doesn’t burn you out, Profit First will give you the playbook.

Mike’s system is simple. But it’s not always easy. The real challenge is building the habit. And once you do, your business stops being stressful and starts being stable.

Conclusion

Running a business without profit is just surviving. Profit First shows you how to stop that cycle and start building something that actually supports your life. It’s not about fancy spreadsheets or perfect discipline.

It’s about creating habits that make profit automatic. If you’ve been stressed about money, this system will help you breathe again. Start small. Stick with it. And watch how everything changes.

Want to go even deeper into why some businesses inspire while others hustle aimlessly? Read my blog post on Start With Why by Simon Sinek and learn how purpose drives everything.