Cash Flow
Profit First
Mike Michalowicz
A simple discipline for cash flow and actually keeping profit.
Recommended for: Not Making Enough Profit
All Challenges
Money
Not Making Enough Profit
Revenue may look good, but there is not enough money left over.
The Challenge
Understand job cost, overhead, pricing, markup versus margin, labor burden, commissions, insurance, contingency, and unprofitable work.
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
Pull your last three jobs and compare price vs actual cost.
Build the System
Next 30 days
Set up Profit First allocations and run every new estimate through the PEP Sheet.
Long-Term Transformation
Where you're headed
Every job is priced for profit and the owner is paid consistently.
Lessons From the Pass It On Library
From Profit First
Profit should not simply be whatever is left at the end.
Framework: Allocate first: Profit, Owner Pay, Taxes, Operating Expenses.
From Fix This Next
When sales are strong but there's no money, fix PROFIT.
Framework: Business Priority Pyramid: Sales → Profit → Order → Impact → Legacy
Pass It On Action
Run one recent job through the PEP Sheet today.
Your Action Plans
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7-Day Action Plan
- Day 1 — Identify the problem: write down exactly how “Not Making Enough Profit” 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 Profit First allocations and run every new estimate through the PEP Sheet.
- 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.
#41 · Money Management
Know the financial condition of your business
Proverbs 27:23–24
#42 · Money Management
Plan before spending
Luke 14:28–30
#47 · Money Management
Create a financial plan
Proverbs 21:5
Related Challenges
Recommended Books
Approved Bookshelf resources related to this challenge.
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Challenge → Diagnose → Prioritize → Learn → Take Action → Measure → Improve → Help Someone Else
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