Cash Flow
Profit First
Mike Michalowicz
A simple discipline for cash flow and actually keeping profit.
Recommended for: My Revenue Is Growing but My Profit Isn't
All Challenges
Money
My Revenue Is Growing but My Profit Isn't
More work, same or less money. Find where profit is leaking.
The Challenge
More work, same or less money. Find where profit is leaking.
Why This Happens
- Underpricing
- Cost increases
- Labor inefficiency
- Material waste
- Too much overhead
- Low-margin jobs
- Poor estimating
- Change-order leakage
- Uncollected receivables
- Uncontrolled growth
Questions to Ask Yourself
- 1.Have your prices kept up with costs?
- 2.Which jobs had the lowest margin?
- 3.Are change orders billed?
- 4.Has overhead grown faster than revenue?
- 5.How old are your receivables?
What to Do First
1
Run your last three jobs through the PEP Sheet.
2
Update your overhead in the Overhead Calculator.
3
Bill any unbilled change orders.
Step-by-Step Solution
- 1
Measure gross profit by job.
- 2
Recalculate overhead.
- 3
Raise prices where needed.
- 4
Track labor and materials vs estimate.
- 5
Create a change-order process.
- 6
Set Profit First allocations.
Three Levels of Solutions
Quick Win
Do this today
Compare estimated vs actual cost on your last three jobs.
Build the System
Next 30 days
Run every estimate through the PEP Sheet and set Profit First allocations.
Long-Term Transformation
Where you're headed
Growth that increases profit, not just activity.
Lessons From the Pass It On Library
From Profit First
Revenue does not equal available cash.
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
Bill every outstanding change order this week.
Your Action Plans
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7-Day Action Plan
- Day 1 — Identify the problem: write down exactly how “My Revenue Is Growing but My Profit Isn't” 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 “Have your prices kept up with costs?”
- Day 4 — Choose one change: Run your last three jobs through the PEP Sheet.
- Day 5 — Assign responsibility: name ONE owner, a deadline, and the expected result.
- Day 6 — Implement: Update your overhead in the Overhead Calculator.
- 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: Have your prices kept up with costs?
- Answer: Which jobs had the lowest margin?
- Answer: Are change orders billed?
- Complete the 7-Day Action Plan.
Week 2 — Build
- Run every estimate through the PEP Sheet and set Profit First allocations.
- Measure gross profit by job.
- Recalculate overhead.
- Raise prices where needed.
Week 3 — Implement
- Track labor and materials vs estimate.
- Create a change-order process.
- Set Profit First allocations.
- 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
#48 · Money Management
Prepare before expanding
Proverbs 24:27
Related Challenges
Recommended Books
Approved Bookshelf resources related to this challenge.
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