Profit First

For many people, setting up a small business or starting to work for themselves is a way to achieve financial independence. Unfortunately, however, many businesses struggle to generate a real profit, finding themselves trapped in a continuous succession of deadlines and constant crises, one episode after another.

Many of the ideas conferred to us regarding the management of a business teach us that our main aim must be growth, but we rarely stop to ask ourselves if this is the right approach. Trying to grow a business that does not generate profit and that consumes all our resources only risks generating a money-eating monster.

By applying traditional accounting systems, that we are all used to, we learn that profit is whatever is left over after business. We even have a formula: profit = revenue - expense.

Leaving profit as the last step, however, we fall into a trap: that of survival. This happens because there are always new expenses, new investments, new and unexpected events.

The good news is that it doesn't have to be that way. If we decide to change the formula, we can immediately start taking our share of the revenues, our profit. All that remains will go to cover the expenses...and we can start right away.