You know the drill. You log into your bank account to check the balance and it’s low…too low for comfort.
By contrast, hopefully, you’ve also experienced the feeling of logging into your account to see it busting at the seams with cash. That feels so good…which is why it’s usually followed by, “let’s purchase a new lens!”, or “let’s improve the house!” or “let’s go on vacation!”.
While I’m a big believer in enjoying today (while also saving for your future), it’s human nature that seeing a big balance in your checking account can make it way too easy to overspend.
That makes the pendulum swing back to the, “oh no, how did my balance get so low” challenge.
Financial teachers and planners have always taught us that we should “pay ourselves first”, especially when it comes to retirement savings. However, business teachers teach us that: Income – Expenses = Business Profit.
While that’s technically true, there is a better way.
What if you took your business profit first?
That is exactly what Profit First by Mike Michalowicz teaches us. It helps us create a system that works with our human nature to break the feast or famine cash flow in our business.
There is another huge myth in business. That is in order to grow you must reinvest everything into your business and there isn’t room for the owner to take a profit. That is simply untrue.
This book teaches you to start where you are…whether you are already taking 50% profit from your business or 0% profit. It allows you to start taking profit TODAY, even if you have to start at 1%.
If that is you, don’t worry. The book will give you a plan to systematically increase your profit and turn your business into a cash creating machine!
What I love about the system is that by creating different accounts to park your money, everything ends up being fully funded when you need it. It also encourages you to run your business on less and be more cognizant about your spending.
There are 5 standard accounts that every business should open:
- Owner’s Compensation
- Operating Expenses
The book also gives you some options to customize your accounts by adding a few additional accounts if necessary. For instance, my business also needs an Independent Contractor account and a Workshop account.
Profit First teaches you to learn to recognize the cash flow of your business by attending to your financials on a regular schedule twice a month. It also sets you up for success and rewards you by taking regular profit distributions from your business.
I can’t possibly give you enough information in this one little blog post have you set it up fully. However, may I suggest heading over to Amazon to pick up this book and start reading it this week. It’s not often that I find a book that has the ability to so easily change the entire trajectory of your business.