"Profit first" is better for entrepreneurs than "G.A.A.P." | Mike Michalowicz | TEDxFultonStreet
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- Опубліковано 5 вер 2024
- This talk was given at a local TEDx event, produced independently of the TED Conferences. Mike explains how he made over a million dollars and then lost it, from a form of bad thinking pervasive among small business owners. "Generally Accepted Accounting Principles", a.k.a. "GAAP", describe profit as 'what remains after expenses are subtracted from revenue'. A simple transposition, Mike suggests, extracting an owner's profit before paying expenses, can help entrepreneurs to avoid making the same mistakes.
Mike Michalowicz (pronounced mi-’kal-ō-wits) started his first business at the age of 24, moving his young family to the only safe place he could afford - a retirement building. With no experience, no contacts and no savings he systematically bootstrapped a multi-million dollar business. Then he did it again. And again.
Now he is doing it for other entrepreneurs. Mike is the CEO of Provendus Group, a consulting firm that ignites explosive growth in companies that have plateaued; is a former small business columnist for The Wall Street Journal; is MSNBC’s business make-over expert; is a keynote speaker on entrepreneurship; and is the author of the cult classic book, The Toilet Paper Entrepreneur. His newest book, The Pumpkin Plan has already been called “the next E-myth!”
About TEDx, x = independently organized event In the spirit of ideas worth spreading, TEDx is a program of local, self-organized events that bring people together to share a TED-like experience. At a TEDx event, TEDTalks video and live speakers combine to spark deep discussion and connection in a small group. These local, self-organized events are branded TEDx, where x = independently organized TED event. The TED Conference provides general guidance for the TEDx program, but individual TEDx events are self-organized.* (*Subject to certain rules and regulations)
Wow Steve from Blues Clues turned into a savage businessman
The formula I practice is:
Income - Savings and investments = Expenses
Makes a lot of sense. Will try that in my next venture. Thanks for your time.
Love this book, Mike is fantastic!! Thanks for the inspiration!
Love this! And the best part is that this principle not only holds for profit in terms of money but as profit as satisfaction, in general.
This should have alot more views. Just read the book
I was thinking the same.
I need to re-read this book! Thanks, Mike!
this is always my formula in my life! take what you want and spend the leftover.
Thank you for sharing your insightful journey and experiences. Your story is not only humbling but incredibly inspiring. It reminds us that resilience and innovative thinking can transform challenges into opportunities for growth and success. Truly grateful for your wisdom and encouragement!
I feel like this would be great if I actually knew how to implement it. Managing my finances as a freelancer is hard enough as is, switching everything up feels super intimidating...
Buy the book then - It will be the best thing you ever do and better than investing in any productivity tech
@@jamesharper8305 I second this comment. I've done it and it's way simpler than other method I've seen, and I am pretty good at accounting and bookkeeping. It's one of those "Why didn't I know about this sooner?"
Hmm. What if sales change from month to month some businesses are seasonal? Some cost of goods sold go up as you increase sales.
Everything is bucketed by a percentage. In an example he gave in a much longer talk, 10% of every sale went to profit, 10% went to owner comp, 15% to taxes, 65% to opex. You can change the ratios to fit your needs. Later in that talk, he mentioned to start off with 1% in profit and slowly implement and increase the buckets as you start to see how it can fit into your business model, but the point is to always to pay profit first. Every quarter, you payout half of the profits even if has not been 90 days and/or the amount is small. In that talk he said his first quarter profits was something like $8 and he went to Starbucks.
Read the book. He explains this.
@@joshuaestrada3166 I don't get what owner's comp is.
This is exactly like pay yourself first methodology. Gotta pay yourself first OR big corporations will jack your dough away instantly
Estou lendo o livro Profit First, e fazendo uma busca, cheguei neste vídeo.
Acredito que o autor não tenha conseguido, em poucos minutos, explorar o conceito poderoso que está atrás do Profit First. Recomendo a leitura do livro. A palestra foi fraca.
Portuguese?
Simple and effective! And easy to remember .
Wow. Watching this on a Valentines day.
This is GOLD! Thank You! ♥️🙏‼️
Thanks
what account does the money for your expenses get put into?
operating expenses i labeled mine as "OPEX" for short
Read the book. :) The details are worth it. Audiobook format too.
started reading 'profit first'
and already created my profit account.
lets see what comes next :)
Only 7.5k views and 2 comments??
I've watch this TED Talk about 5 times... While I get your question, I don't think it's uncommon to have that many views - now 11.9k and have very little comments.
The speaker didn't really inspire engagement. That said, I got the point of what he said, maybe he could have said it better...
He was clearly nervous - thus his (nervous) humor didn't land so well. Then again, we (the UA-cam veiwer) do not know how many were in attendance nor how well audience laphter was picked up... likely not much of there laughter at all can be heard by us (UA-cam viewers)
Great video! P90X works tho
I didn't get it. How can I take profit before I even make a sale? Where is the profit coming from?
Pretty sure it said "Sales", nobody is saying you can do anything without sales.
SALES - Profit
Get the sale. Take out the profit (a set %) then expenses and operating costs.
If you don't have sales yet, then perhaps you want to read the Toilet Paper Entrepreneur.
Makes sense, just not the way he articulates it.
Great talk, but what that was actually all about is Income-Savings=Expenses. I don’t think it has anything to do about the GAAP. Expenses comes first if you want some sales, correct me if I’m wrong, that’s why the Sales-Expenses=Profit is the GAAP formula.
The point of the shift in thinking, is that if you subtract your pay as the first expense, then it forces you to be wiser, more strategic with the remaining expenses. When expenses come first, we often do not question the costs. If we flip the equation, we get more intentional about our spending. As an entrepreneur, being paid first and running your business of what remains is more sustainable and less stressful.
@@Bree8tiveBEing Well stated.
@@Bree8tiveBEing Exactly!!! 👏👏👏
Thats how literally everyone does business. Isn't it?
No. Most do the opposite. They pay expenses and whatever is left they put back into the business in hopes of growth while not paying themselves.
Very few do it this way.
GAAP is a set of principles which companies (for the most part) follow when performing accounting for preparing their financial statements. It establishes consistency for readers of financial statements. It's not a formula. Further, taking profit before paying expenses make no sense. Gaining financial literacy before embarking on business is always a good idea. That and having good advice.
agree. financial literacy is important. he needs actual professional/real accountant in his business.
This is exactly what I was thinking about, as I think of this idea.
I think they can both work together, but that would be when this works.
Otherwise, the idea alone can be problematic.
Great book, not that good presentation
He's a bit goofy
@@redcomic619 Love his goofiness. He is being real.
@@michaelm9621 Agree!!
functional depression, hmmm
No thank you to you.
I have news for him- The Earth IS flat!
1. Business owner hires an employee
2. Business owner receives a small revenue
3. Employee asks for salary
4. Business owner says he can only pay less than what was agreed since he has to take profit first
5. ???
6. Profit
Read the book. :)
I started all my businesses without money and definitely can vouch for this.
Great accounting talk. With all due respect though, The earth is flat. We did not go to the moon. We are the center of the universe. I'm just saying. Great talk though.
sarcspark you must be on drugs
Lay off the crack. I know what people on crack sound like, you are it.