Profit First audiobook cover - Transform Your Business From a Cash-Eating Monster to a Money-Making Machine

Profit First

Transform Your Business From a Cash-Eating Monster to a Money-Making Machine

Mike Michalowicz

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Entrepreneurship

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Profit First
The Core Philosophy+
The Bank Account System+
Gradual Implementation+
Using the Profit+
Driving Efficiency+
Eradicating Debt+
Personal Finances+

Quiz — Test Your Understanding

Question 1 of 10
According to the book, why does the traditional formula for profit (Sales - Expenses = Profit) usually fail?
  • A. It requires complex accounting software that most small businesses cannot afford.
  • B. It triggers Parkinson's Law, causing entrepreneurs to spend whatever money is available.
  • C. It forces business owners to focus too heavily on reducing expenses rather than increasing sales.
  • D. It does not account for the fluctuating tax rates that small businesses face.
Question 2 of 10
What is the reworked, 'Profit First' formula that entrepreneurs should use?
  • A. Sales - Expenses = Profit
  • B. Profit - Expenses = Sales
  • C. Sales - Profit = Expenses
  • D. Revenue - Taxes = Profit
Question 3 of 10
The author recommends setting up five specific bank accounts for your business. Which of the following is NOT one of those five accounts?
  • A. Owner's Salary
  • B. Tax
  • C. Marketing and Advertising
  • D. Operating Expenses
Question 4 of 10
How does the author suggest protecting the Profit and Tax accounts from the temptation to spend them?
  • A. Hire a third-party accountant to co-sign any withdrawals.
  • B. Lock the funds in a long-term certificate of deposit (CD).
  • C. Keep these two accounts at a completely different bank.
  • D. Convert the funds into physical cash and store them in a safe.
Question 5 of 10
When first implementing the Profit First system, how much does the author recommend allocating to the profit account?
  • A. 1 percent of what the company makes.
  • B. 10 percent of your total operating expenses.
  • C. 20 percent of your total revenue.
  • D. An amount equal to your closest competitor's profit margin.
Question 6 of 10
At the end of every quarter, what should you do with the funds accumulated in your Profit account?
  • A. Reinvest 100% of it back into the business to accelerate growth.
  • B. Take 50% to reward yourself and leave 50% as an emergency fund for the business.
  • C. Use the entire amount to pay down any outstanding business debts.
  • D. Transfer it to your Operating Expenses account for the upcoming quarter.
Question 7 of 10
What efficiency lesson is demonstrated by the example of UPS truck drivers?
  • A. Upgrading to electric vehicles is the fastest way to increase profit margins.
  • B. Allowing drivers to choose their own routes improves employee morale and retention.
  • C. Small operational changes, like avoiding left turns, can result in massive cost savings.
  • D. Outsourcing delivery routes to independent contractors significantly reduces liability.
Question 8 of 10
If your business is in debt, how should you adjust your profit distribution at the end of the quarter?
  • A. Stop taking profits entirely until the debt is fully paid off.
  • B. Use 99 percent of your personal profit share to pay the debt, and keep 1 percent for yourself.
  • C. Take out a larger loan to consolidate the debt and maintain your 50 percent profit reward.
  • D. Transfer the debt to your personal accounts so the business remains profitable on paper.
Question 9 of 10
When applying the Profit First system to your personal finances, what should you do when your income increases (e.g., getting a raise)?
  • A. Invest half of the extra money into your lifestyle and put the rest into your retirement fund.
  • B. Upgrade your lifestyle immediately to match your new income level.
  • C. Put 100% of the increase into a high-risk investment portfolio.
  • D. Use the entire increase to start a new side business.
Question 10 of 10
How often does the author recommend managing your money and distributing it between your various accounts?
  • A. Daily
  • B. Weekly
  • C. Every two weeks
  • D. Monthly

Profit First — Full Chapter Overview

Profit First Summary & Overview

Profit First (2014) lays out the practical steps entrepreneurs can take to immediately see a positive difference in their bank accounts. These blinks explain how traditional accounting stands between businesses and the profits their owners dream of, and proposes a new approach that guarantees consistent profitability.   

Who Should Listen to Profit First?

  • Struggling entrepreneurs who want to turn their businesses around
  • Successful business owners looking to take their profits to the next level
  • Accountants and financial managers interested in learning new methods

About the Author: Mike Michalowicz

Mike Michalowicz is an entrepreneur with over 24 years of experience and four multi-million-dollar companies to his name. He’s shared his knowledge through columns in the Wall Street Journal, Entrepreneur Magazine, and Harvard Business Review, and as a guest lecturer at Columbia University and Princeton University. He’s also the author of four other books that include The Toilet Paper Entrepreneur and The Pumpkin Plan.

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