Profit First: Committing to A Profitable Business
At the end of Chapter One of Profit First, we are instructed to do two things:
1. Draw a line in the sand, agreeing that, as of today you are turning over a new leaf. Commit to yourself, that you will run a profitable business and make everything else secondary to that goal.
2. Agree not to beat yourself up, even if your business is on the verge of going under, or if you just want to ramp up your profits even higher. Every business can improve with Profit First.
It makes complete sense to take out your profits first, pay yourself second, and with what is left over pay your expenses. If you don’t have enough money to pay your expenses, then cut your expenses!! Hello! Game Changer!
I love this chapter because it supports Step 4 (Money Multiplier) in the MeetConstance Business Blueprint.
According to Mike Michalowicz, there is a more to a healthy diet, based on four core principles of weight loss and nutrition. These four principles are exactly the same foundation for business health:
(Michalowicz, Profit First)
- Use Small Plates: When money comes into your main operating account immediately disperse the funds into different accounts in predetermined percentages.
- Serve Sequentially: Always move money to your Profit Account first, then to your Owner Pay Account, and then to your Tax Account, with what remains pay your expenses.
- Remove Temptation: Move your Profit Account and Tax Account out of your arm’s reach, thereby restricting access to those funds.
- Enforce a Rhythm: Do your payables twice a month. Get into a rhythm of paying bills twice a month so you can have a better understanding of your cash flows.
I am currently in the process of implementing the Profit First system. Thus far, the hardest part was setting up the bank accounts and getting my accounting team on board. But once we got past this, we have began to realize it is a pretty easy system to maintain.
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To Whole Businesses ~ Constance
Meet me on March 15th for a discussion of the book 'Good to Great' https://www.meetconstance.com/upcoming-events/beverlyhillsbookclub
Pick up a copy of February’s book 'The Goal: A process of Ongoing Improvement'