Finances can be a trying topic, which is why this writer hopes to make it bearable.
This starts with Michalowicz dizzying relationship with finances before it proceeds to talk about the way to budget in order to achieve the most amount of personal profit.
He is an entrepreneur who was well-known in this book for selling multimillion-dollar companies. He stated that he was better at developing and selling businesses than making them sustainable. His writings have appeared at the Wall Street Journal, Harvard Business Review, and Open Forum and has spoken at TEDx.
Michalowicz has written about how foolishly he regarded money when he first started making it. As a result, he endured years of stress and depression. The epiphany behind this book’s inspiration came when his daughter offered to pay part of his financial problems with her piggy bank.
How Does It Hold Up…?
The reality is that this shift might appear minor, but it does have large implications throughout the accounting chain. Instead of the accountant making the decision concerning the expenses, rather the business itself will inform the profit-first entrepreneur whether there are any necessary expenses that need to be made. One such way that the business prioritizes the accounting is by letting the taxes of both the business and the owner be paid. Of course, Michalowicz recommends finding a profit-first accountant for an individualized accounting plan.
One key component of profit-first is the incremental value of profit. It does not involve hoarding the profits nor does it involve investing it in the company while losing sight of the profit margin, which could lessen in time. It is around the halfway point that Michalowicz gets into detail about this component.
Another part of profit-first is the reality of paying within the percentages. If there is any money left from every other expense, it goes towards personal profit. If the expenses exceed the limit, then make cuts. It is all about working with one’s own limits without resorting to debt. In that way, it is about the slow progression to prosperity, rather than hoping for that small chance of a good month to happen. Good and bad months are rare, while medium months are normal.
Michalowicz makes mention of Parkinson’s Law as a way to change the profit-first accounting equation. This is done through accumulating value through small portions along a period of time. Tim Ferriss has also talked about Parkinson’s Law, but not in the context of finances, rather in terms of time. By accumulated many important tasks into easily outsourced increments, it can ensure that the entrepreneur has more time to develop proficiency and leverage.
As for Cal Newport, he would focus on the parts where Michalowicz discusses focusing on being 10% entrepreneur and 90% employee. The more money they make, the more they can afford a system that completes the important tasks. This reduces the role of the employee role to 70%. Newport and Ferriss would argue that it is not just the inner workings of the business itself, rather the people outside of it that are asking questions or having grievances. The system would help to address all of that through outsourcing to firms that provide screened virtual assistants at a per hour basis.
This was the most recommended book in Miller’s 6-Figure Bloggers book, since it is cited by Monica Froese, Courtney Slazinik, and Miranda Nahmias. The story is the same with them, for they benefited from the book by budgeting to an extent that they were able to save enough money to do whatever they or their families wanted. It especially helped them with their businesses.
Connecting To The Previous Book
Dale Carnegie wrote about human relationships, whereas this book is about the relationship between the entrepreneur and their business. Of course, one such relationship Carnegie mentions is between the employer and the employee. He argued that there should be personal accountability and problem-solving when it comes to any problems that might arise. He noted that nobody can be shamed to do a task effectively, rather they would need to feel important in doing so.
Michalowicz constantly makes reference to the “old system” that accountants have relied on, which do not prioritize profits-first. It can make the reader feel lost, particularly since they are used to hearing how accounting works from their economics class in high school. He noted that this is common theory, but he suggests a more subversive approach, which is to implement small increments into the accounting system of the business via Parkinson’s Law.
Michalowicz writes in a humorous tone in order to make the complicated language of business and finances more palatable. Of course, the hyphenated phrases were a bit distracting, along with some of the other humorisms. Another problem was the constant use of popular media as references, rather than academics and authors.
An important rhetorical part of this book is his discussion of finances, which can be intimidating to most people.
This book really makes one think about the concept of budgeting, in such a way that it involves incremental steps rather than paying for the bare minimum. Of course, it does require talking with an accountant, specifically one that is profit-first, though nonetheless, the frugality can definitely involve creative thinking, just as much as saving time.
As for the output of that creativity, it would require the output of the frugally earned profits. With money prioritized to the point of reducing any hidden costs, Michalowicz has several outputs for that money. One is to pay off any problems that may occur with the business, since they are bound to happen. When there are no problems, he recommends spending it on relaxing, celebratory pursuits.
This is definitely the type of book to be introduced to anyone interested in making as much profit as possible. I can definitely see why this book would be the most recommended in Miller’s book, since it plans out every aspect of budgeting before you get started on a business. The goal is to see everything as increments to a large goal.
Inspiration To Myself
I hope that I can implement this type of thinking into my budgeting, since frugality does not appear to be enough, rather there needs to be an effective means of accruing value to the point when I can fix any problems that might occur.
This is definitely a book that can prevent many problems from occurring to many small businesses.
Recommend This To…
- Any high schooler. This book is easy to understand and it would teach them the fundamentals of finance that isn’t from a more traditional stance.
- Anyone thinking of starting a small business or already have one.
- Anyone who feels they can’t catch a break and have a budget that is essentially hand-to-mouth.
- Carnegie, Dale. “How To Win Friends & Influence People.” Special Anniversary Edition. Over 70 Years in Print. Simon & Schuster. 1936. First Pocket Books Paperback Printing. November 1998.
- Ferriss, Tim. “The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich.” Expanded and Updated Edition. Harmony Books. 2010.
- Michalowicz, Mike. “Profit First: Transform Your Business from a Cash-Eatin Monster to a Money-Making Machine.” Penguin Random House. 2017.
- Miller, Sally. “The Essential Habits Of 6-Figure Bloggers: Secrets of 17 Successful Bloggers You Can Use to Build a Six-Figure Online Business.” Sally Miller. 2018.
- Newport, Cal. “Deep Work: Rules For Focused Success In A Distracted World.” Grand Central Publishing. 2016.