• “The Small Business Administration (SBA) states that there are 28 million small businesses in the United States alone. The SBA defines a small business as a company that generates $25 million or less in annual revenue. That includes my business, and I suspect it includes yours. Shoot, that even includes Justin Bieber's (his "small business" music sales pulled in only $18 million last year). So that's 28 million of us entrepreneurial "weirdos" in the United States alone… That's a lot of entrepreneurs, a lot of people with guts, smarts, and determination who decided they had something of value to offer the world and took a shot at building something out of it… Regardless of your entrepreneurial status, you are a miracle worker, so to speak. You convert ideas into reality. You find customers; you make stuff for them; you deliver a service to them; and they pay you for it. You keep selling; you keep delivering; you keep managing the money. All of us are smart, driven people. Really smart. Really driven. But there is one really friggin' nagging problem: eight out of ten businesses fail, and the number one reason they fail is lack of profitability… Are you surprised? Probably not. I wasn't. It's true, and it makes me want to drown my sorrows in Margaritaville. The majority of small businesses, and medium businesses and even some big ones, are barely surviving. That guy driving the new Tesla whose children go to private school via chauffeur and who lives in a massive house and runs a $3 million company, is one bad month from declaring bankruptcy. I should know; he's my neighbor… The SBA Young Entrepreneur of the Year award recipient who is changing the world, who is lauded as a member of the next generation of genius, who is destined to be on the cover of Fortune magazine because of his business acumen, is taking out bank loan after bank loan and racking up credit card debt to cover payroll behind the scenes. I should know; that was me.” - intro
• This book is valuable because it turns cash-eating profitless businesses into well-operated machines, mainly by establishing the simple habit of taking your profit first!

Take Your Profit First

• “If you aren't profitable, the natural assumption is that you haven't grown fast enough. I have news for you, people. You're completely fine. You don't need to change. The old formula to profit is what's wrong. It needs to change. You know the formula I'm talking about: Sales - Expenses = Profit. That crusty, bifocal-wearing, old-person-smelling formula at first blush makes total sense. Sell as much as you can, then pay the bills, and what is left over is profit. Here's the problem: there are never any leftovers... The old profit formula creates monsters of businesses. Cash-eating monsters. But we stay loyal to the formula, and things get worse. The solution is profoundly simple: Take your profit first.”
• The problem: “Most entrepreneurs are living a financial nightmare, one that's populated by Freddy Krueger or Frankenstein's monster in its raw, unadulterated scariness. In fact, I am convinced that I am Dr. Frankenstein. If you read Mary Shelley's classic, Frankenstein, you know exactly what I'm talking about. The good doctor reanimated life. From mismatched body parts, he stitched together a living being more monster than man. Of course, his creation wasn't a monster at first. No, at first it was a miracle. Dr. Frankenstein brought to life something that, without his extraordinary idea and exhaustive hard work, could not exist. That's what I did. That's what you did. We brought something to life that didn't exist before we dreamed it up; we created a business out of thin air. Impressive! Miraculous! Beautiful! Or at least it was until we realized our creation was actually a monster. Stitching together a business with nothing but a great idea, your unique talents, and whatever few resources you have at hand is most certainly a miracle. And it feels like one, too, until the day you realize your business has become a giant, scary, soul-sucking, cash-eating monster. That's the day you discover that you, too, are an esteemed member of the Frankenstein family.”

You Can’t Always Grow Your Way Into Profits

• “I knew how to grow a business from nothing, working with whatever resources I had; but as revenue increased, so did my spending. I discovered that this was the way I ran both my personal life and my business. I took pride in making magic happen with pennies in my pocket, but as soon as I got some real cash, I made sure that I had a very good reason to spend it. It was a check-to-check lifestyle, but sustainable - as long as sales were sustained and did not dip. While my companies grew explosively, I still operated them on a check-to-check basis - and I had no idea that this was a problem. The point was to grow, right? Increase sales and the profit will take care of itself, right? Wrong. Money problems occur when one of two things happen: sales slow down or sales speed up and you overcommit to a higher cost structure”
• It’s better to build profitable habits when your business is young than later on: “Most business owners try to grow their way out of their problems, hinging salvation on the next big sale or customer or investor, but the result is simply a bigger monster. (And the bigger your company gets, the more anxiety you deal with. A $300,000 cash-eating monster is much easier to manage than a $3,000,000 one. I know; I have survived operating both.) This is constant growth without concern for health. And the day that big sale or customer or investor doesn't show, you will fall to the ground and curl up crying like a baby.” (Some tech or scale industries certainly benefit from winner-take-all dynamics where you want to land grab, like Rockefeller with Standard Oil in the 1900s or Uber more recently, but many businesses live in a somewhat commoditized world and should post profits yearly as they grow)

Optimize for DURABILITY of Consistent Growth

• “Here's the reality if you want healthy, sustainable growth - which, not so surprisingly, will spawn more healthy growth - you need to reverse engineer the profit. Take profit first. You can't grow out of your profit problem. You need to fix profit first, then grow. You must figure out the things that make profit and dump the things that don't. When you focus on growth, it is inevitably a scramble to grow at all costs. Yes, at all costs (including the quality of your life). When you focus on profit first, you inevitably figure out how to make a profit consistently. Profitability. Stability. Sanity. Forevermore.” → Thiel and Housel: the DURABILITY of consistent growth or profits is more powerful than a couple years of bonkers growth
• “Instead of being the world's best at one thing, mastering the process of delivering perfectly and super-efficiently, we end up doing a greater variety of things and becoming less and less efficient at each step while our businesses become harder to manage and costlier to run.” → A core reason why small businesses aren’t profitable is because they offer too many services without focus, where we saw Sam Zell scale down railroads and Bill Anders of General Dynamics achieve higher true returns once they sold off or discontinued the low return biz lines: “General Dynamics should only be in businesses where it had the number one or number two market position…”, “the company would exit commodity businesses where returns were unacceptably low”, and “stick to businesses it knew well”

The Key to Profits? It’s As Simple as Buying Smaller Plates…

• Atomic habits - one-time choices that can lead to prolonged payoffs- “As I continued to watch the program, the expert went on to say that when we use smaller plates, we dish out smaller portions, thus eating fewer calories without changing our ingrained behavior of serving a full plate and eating all of what is served. I sat up straight on the couch, my mind alert with this new revelation. The solution is not to try to change our ingrained habits, which is really hard to pull off and nearly impossible to sustain, but instead to change the structure around us and leverage those habits.” → “If I reduced the "plate size" of my business's operating account, I would spend differently. So rather than try to curb my spending habit, I would create the experience of having less cash on hand than I actually had, and then would find ways to still make things work… Hey. Hey, wait. Wait one stinkin' minute. Could I actually set aside some of it for profit - before I paid bills? And that's when it hit me - what if I took my profit first?”
• Fascinating stuff - he’s basically using the atomic habit ideas of smaller plates, Munger’s granny’s rule to eat your veggies first then dessert, adjusting your environment, and setting an eating rhythm but applying it to a business → “Isn't it funny how much we change based upon what is available? Here is what's fascinating: Parkinson's Law triggers two behaviors when supply is scant. When you have less, you do two things. The first is obvious: you become frugal. When there is less toothpaste in the tube, you use less to brush your teeth. That is the obvious part. But something else, far more impactful happens: you become extremely innovative and find all sorts of ways to extract that last drop of toothpaste from the tube. If there is one thing that will forever change your relationship with money, it is the understanding of Parkinson's Law. You need to intentionally make less toothpaste (money) available to brush your teeth (to operate your business. When there is less, you will automatically run your business more frugally (that's good) and you will run your business far more innovatively (that's great!).” (You start questioning the expenses you’ve always accepted…)

Implementation