Chap 1

• Bigger is not better, profit prior to growth

Chap 2

• Profit First Laws
  • Parkinson’s Law : induced demand – the demand for something expands to match its supply
    • Toothpaste analogy: when it’s new, a big gulp of usage
    • When there’s less toothpaste, you use less toothpaste each time, but you become extremely innovative to save toothpaste
    • How – extract profit first, leave an “almost empty toothpaste” for expenses
  • Primacy effect – we add additional significance on whatever we encounter first
  • Remove temptation – take profit first, and put it away
  • Spend cash with rhythm 
• Sales – Profit = Expenses, Principles:
  • Small Plates
  • Server sequentially:
    • Pay profit first, then tax, owner’s comp, OPEX. Then pay bills.
    • Eliminating unnecessary expense bring more health to business than you can imagine
  • Remove Temptation
  • With Rhythm 

Chap 3

• Five accounts
  • Income
  • Profit
  • Tax
  • OwnerComp
  • OpEX

Chap 4

• Business stages per author
  • Revenue < 250K:
    • Only yourself
    • Many freelancer at this stage
  • Revenue between 250-500K
    • Have employee
    • Basic System – shared CRM
  • Revenue between 500K-1M
    • More system & people, want more reserve as 1M->5M is hardest
  • Revenue between 1M-5M
    • Need a ton of system / process / checklist
    • You will be no longer doing most of the work
  • Revenue between 5M-10M
    • Typically management team steps in
  • Revenue between 10M-50M
    • Stabilize and achieve predictable growth

Chap 5

• Move profit percentage up slowly
• Profit percentage double, business longevity triples – reason, more profit allocation, less OPEX and more efficiently business is run
• Transition from “working in the business” to “working on the business” is not instant, it’s gradual and slow

Chap 6

Chap 7

• Expense classification
  • P : Profit-generating
  • R : Can be replaced with cheaper alternative
  • U : Unnecessary
• Leaner team (labor expense), also P/R/U
  • Layoff : second-person as witness, then staff meeting to reassure
  • Absolutely no pay-cut
• Cut cost – build negotiation muscle by negotiating small expenses
• Emotional momentum – smaller things first, then bigger ones gradually

Chap 8 

• Cost cutting via innovation
• Dig well vs. Make rain
  • Build efficiencies
• Good example: UPS truck’s route always “right turn”
• 80/20 the “bad client”
• Scale clients with the same need (super efficiency serving system)
• Upsell from lawn guy – leaves in gutter, roof issues etc.
• Sales without putting efficiency measures first is dangerous game

Chap 9

• Labor cost target
  • When to hire new employee – each full time should at least generate $150-250K (US)
  • High labor cost industry – revenue 2.5x the labor cost, cheap labor cost industry – revenue 4x the labor cost

Chap 10

Chap 11

• Don’t cut the wrong cost