Cash Flow
Profit First
Mike Michalowicz
A simple discipline for cash flow and actually keeping profit.
Recommended for: I Don’t Understand My Numbers
All Challenges
Money
I Don’t Understand My Numbers
Learn the few numbers that reveal whether the business is healthy and improving.
The Challenge
Understand revenue, direct costs, gross profit, gross margin, overhead, net profit, receivables, payables, cash, and backlog.
Why This Happens
- The problem has not been defined clearly enough to solve.
- Daily urgency has replaced a consistent process.
- The business is not measuring the few activities and results that matter most.
Questions to Ask Yourself
- 1.What is happening now?
- 2.How long has this been a problem?
- 3.What have you already tried?
- 4.What result do you want in the next 90 days?
- 5.What number would show improvement?
- 6.Who owns the next action?
What to Do First
1
Write down the current facts without assumptions.
2
Choose one measurable result for the next 30 days.
3
Schedule the first action and assign clear ownership.
Step-by-Step Solution
- 1
Identify the root cause instead of treating only the symptom.
- 2
Choose the smallest practical action that can create evidence.
- 3
Use the related tool or worksheet to organize the work.
- 4
Review progress every week and adjust from real results.
- 5
Share what worked so another owner can learn from it.
Three Levels of Solutions
Quick Win
Do this today
Write down your cash, AR, and bills due this week.
Build the System
Next 30 days
Set up a simple weekly scorecard with 5–7 numbers.
Long-Term Transformation
Where you're headed
Decisions based on clear numbers reviewed every week.
Lessons From the Pass It On Library
From Profit First
Review cash regularly.
Framework: Allocate first: Profit, Owner Pay, Taxes, Operating Expenses.
From Traction
A weekly scorecard keeps the business honest.
Framework: Vision · People · Data · Issues · Process · Traction
Pass It On Action
Build your first weekly scorecard.
Your Action Plans
Sign in to check off steps and save progress to My Growth Plan. Sign in
7-Day Action Plan
- Day 1 — Identify the problem: write down exactly how “I Don’t Understand My Numbers” shows up in your business.
- Day 2 — Review the numbers: gather the facts, figures, and examples connected to this challenge.
- Day 3 — Find the root cause: answer “What is happening now?”
- Day 4 — Choose one change: Write down the current facts without assumptions.
- Day 5 — Assign responsibility: name ONE owner, a deadline, and the expected result.
- Day 6 — Implement: Choose one measurable result for the next 30 days.
- Day 7 — Review what happened: what worked, what didn’t, and what you’ll do next week.
30-Day Action Plan
Week 1 — Diagnose
- Answer: What is happening now?
- Answer: How long has this been a problem?
- Answer: What have you already tried?
- Complete the 7-Day Action Plan.
Week 2 — Build
- Set up a simple weekly scorecard with 5–7 numbers.
- Identify the root cause instead of treating only the symptom.
- Choose the smallest practical action that can create evidence.
- Use the related tool or worksheet to organize the work.
Week 3 — Implement
- Review progress every week and adjust from real results.
- Share what worked so another owner can learn from it.
- Train the people involved and assign owners.
Week 4 — Measure & Improve
- Compare results to where you started.
- Write one lesson learned.
- Adjust the process.
- Share what you learned with someone in the fellowship.
Biblical Principles
Wisdom for the journey — encouraging stewardship, integrity, and service, never a promise of guaranteed success.
#31 · Integrity
Use honest measurements
Proverbs 11:1
#41 · Money Management
Know the financial condition of your business
Proverbs 27:23–24
#47 · Money Management
Create a financial plan
Proverbs 21:5
Related Challenges
Recommended Books
Approved Bookshelf resources related to this challenge.
Systems
Traction
Gino Wickman
A practical operating system for growing past the owner's limits.
Recommended for: I Don’t Understand My Numbers
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Challenge → Diagnose → Prioritize → Learn → Take Action → Measure → Improve → Help Someone Else
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