Welcome to another episode of The RVA Small Business Show with your host Cory Mosley. In today’s segment, we are joined by Mike Michalowicz, Author of “Profit First”.
Mike is here to share his practical advice on how to achieve a profit at the start of your business and help you create long-term growth.
Profit means that there’s more money reserved in the business than being spent.-Mike Michalowicz
Profit First – A Contrarian Approach
When it comes to turning a profit, conventional wisdom often suggests that businesses must first scale or reach a certain revenue threshold before they can start thinking about profitability. But what if we turn that idea on its head?
Mike, in his riveting book “Profit First,” argues that instead of focusing on sales – expenses = profit, we should flip the formula to sales – profit = expenses. This simple yet powerful shift places profit at the forefront of your business decisions rather than an afterthought.
Starting with Profit in Mind
So how do you put this theory into practice? Here are some practical steps to get you started.
- Set Clear Profit Targets: Before anything else, establish a clear profit goal. This gives you a concrete target to work towards and helps you make strategic business decisions.
- Trim the Fat: Evaluate your expenses and cut out the unnecessary ones. Remember, every dollar saved is a dollar added to your profit margin.
- Optimize Pricing: Ensure your pricing reflects the value you provide. Underpricing will erode your profits, while overpricing can drive away potential customers.
- Maximize Efficiency: Make the most of your resources. Whether it’s time, money, or manpower, efficient use of resources directly contributes to your bottom line.
Achieving profitability is only half the battle. The real challenge lies in maintaining and growing your profits over the long term.
Here are some strategies that Mike suggests for sustained growth:
- Reinvest Profits: Plow back a portion of your profits into the business to fuel growth.
- Diversify Revenue Streams: Explore different avenues for income to reduce dependency on a single source.
- Stay Customer-Centric: Keep your customers at the heart of your business. Happy customers often translate into repeat business and word-of-mouth referrals, both critical for long-term profitability.
- Continual Learning and Improvement: The business landscape is continually evolving. Stay updated, adapt, and continually seek ways to improve your business operations.
Your business’s profitability doesn’t have to be an elusive, long-term goal. By adopting Mccallowitz’s innovative approach and practical strategies, you can start seeing profits earlier and ensure long-term growth.
- Flip the Profit Formula: Adopt the sales – profit = expenses approach to prioritize profit from day one.
- Set Clear Targets: Establish concrete profit goals to guide your business decisions.
- Optimize Expenses and Pricing: Trim unnecessary expenses and set pricing that reflects your value.
- Think Long-Term: Strategies for sustained growth include reinvesting profits, diversifying revenue streams, staying customer-centric, and continuous learning.
Click here to pre-order Mike’s new book “All In: How Great Leaders Build Unstoppable Teams”.
Click here to purchase “Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine”.