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May 28, 2019 23:58:37

profit first

by @swizecteller | 317 words | 🐣 | 116πŸ’Œ

Swizec Teller

Current day streak: 0🐣
Total posts: 116πŸ’Œ
Total words: 32303 (129 pages πŸ“„)

If you are running a business or your own life, and you haven't read Profit First, you should give it a read. That book saved my ass.

Lemme tell you how πŸ‘‡

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In October last year I was invoice-to-invoice. For reasons that are completely my fault. I had just downsized my day job to 4 days/week to focus on the sidehustle, slashed my regular income, and spent a bunch of money at the same time.

Oops

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Invoice-to-invoice is a stressful place to be. No fun at all.

By December 31st, I had about ~$7000 in the bank. That's not a lot for San Francisco.

Now there's $50,000. Enough for 5 months of expenses AND for taxes too. πŸ’ͺ

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So how did Profit First let me save up almost $50k in 5 months?

Well a lot of things panned out, but Profit First is how I kept the money πŸ˜‡

The core idea is this: You're thinking about profit all wrong.

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Profit isn't what's left over after expenses.

Expenses are what's left over after profit πŸ˜‰

Take your revenue, put aside desired profit, then pay yourself. You can use what's left to play business. Invest in growth, expenses, etc.

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If there isn't enough money left after profit and paying yourself (and taxes), then your business needs to be optimized. Focus on that until it fits.

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"Oh but Swiz I'm in debt, I can't just put money aside for profit and even to pay myself"

How are you gonna pay down your debt if you don't have profit? You need left-over cashflow to pay debt otherwise you're just going into debt somewhere else.

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As @tenlinesofcode said: 
eventually while running an unprofitable business, it's time to get a new and less expensive hobby

Keep that in mind and you'll be fine :)

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PS: there's a lot of tactical stuff that goes into all this, but @MikeMichalowicz ‏is much better at explaining it than I am, go read his book

  • πŸ™Œ 1
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    @swizecteller I've always liked the idea of profit first (at least for personal finances). What percentage of your revenue should you typically dedicate to profit?

    svenka avatar svenka | May 29, 2019 11:07:36
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      @svenka that's super hard to say and it depends. The book has a formula to help you decide. Me I'm targeting 5%

      Swizec Teller avatar Swizec Teller | May 29, 2019 09:18:56
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