The Profit First Approach: Paying Yourself Before Expenses

Most entrepreneurs follow a simple equation:

Revenue – Expenses = Profit

It makes sense on the surface. You make money, cover all your expenses, and whatever’s left over is your profit.

But here’s the problem: there’s rarely anything left over.

Between software subscriptions, marketing costs, office rent, and unexpected expenses, profit becomes an afterthought. And let’s be real—how often do business owners actually pay themselves what they deserve?

What if we flipped the formula?

Revenue – Profit = Expenses

This is the core idea behind the Profit First Approach, a concept popularized by Mike Michalowicz. Instead of treating profit as an afterthought, you take it off the top—before anything else. You prioritize paying yourself first, then run your business with what remains.

Why Does This Work?

1️⃣ It forces financial discipline.
By working within a set budget (what’s left after taking profit), you naturally become more mindful of your expenses.

2️⃣ It ensures you get paid.
Too many entrepreneurs struggle financially despite running successful businesses. This method prevents that by making sure you see financial rewards from your hard work.

3️⃣ It makes your business more sustainable.
A business that can’t generate profit without sacrificing financial stability isn’t built to last. This approach helps ensure long-term viability.

How to Start Using Profit First

✔ Step 1: Set Up a Profit Account
Open a separate bank account exclusively for profit. Automate a percentage of every dollar you earn into this account—start with as little as 1-5%.

✔ Step 2: Pay Yourself First
Every time money comes in, move your set percentage into the profit account before paying bills or expenses.

✔ Step 3: Operate Within Your New Budget
Whatever remains after taking your profit is what you have to cover operating expenses. This might highlight inefficiencies or unnecessary spending, helping you trim the fat in your business.

Final Thoughts: Your Business Should Pay You First

A business that doesn’t pay you isn’t a business—it’s an expensive hobby.

By shifting to the Profit First Approach, you’re not just hoping for profit—you’re making it a priority. The result? A more profitable, sustainable, and rewarding business.

Have you tried this method before? Let me know in the comments!

#DigitalEntrepreneur #SmartFinance #ProfitFirst #FinancialFreedom