Profit First

When the Money Disappears

A consultant named Debbie Horovitch sat in a green room in San Francisco and broke down crying in front of eight thousand people watching online. She owned a social media agency in Toronto. She had been at it for ten years. The numbers Mike Michalowicz had just walked her through showed that for all that work, all that revenue, all that hustle, she had almost nothing to show. "I am a fool," she kept saying, half to herself, half to him. "I am a fool."

She wasn't a fool. She was running her business the way nearly every small business owner runs theirs, by glancing at the bank balance every morning, paying whichever bill was screaming loudest, and quietly assuming that profit would eventually show up at the end of the year. It almost never does. And the strange, almost unfair thing about it is that the harder you work and the more money you make, the worse the problem usually gets.

Mike Michalowicz wrote Profit First because he had been Debbie Horovitch. He had sold a multimillion-dollar computer forensics business to a Fortune 500 firm. He had cashed a single check for three hundred eighty-eight thousand dollars. He had bought a Dodge Viper, a Land Rover for his wife, a tricked-out BMW, joined a private club where they put his name on the wall, and rented a remote house on a Hawaiian island for three weeks. He had also, in the next twenty-four months, lost it all by sprinkling that money across a dozen startups and watching them die one by one. He called himself the Angel of Death.

By Valentine's Day of 2008 he had ten thousand dollars to his name and bills three times that size. His accountant called with the good news that he only owed twenty-eight thousand dollars in taxes. Mike came home, sat down at the dinner table on a holiday his family treated like Thanksgiving, and broke. His nine-year-old daughter Adayla ran upstairs and came back with her piggy bank, the one she had received as a baby gift, the rubber stopper carefully sealed with masking tape and duct tape and rubber bands. She slid it across the table and said, "Daddy, we're going to make it."