How 'Profit First' Transformed My Business
May 14, 2024
If you've ever found yourself in a constant battle to keep your business finances afloat, you're not alone. At times, I too struggled to pay myself consistently, and felt some strain of unpredictable cash flow. But all of that changed when I discovered the transformative power of "Profit First" by Mike Michalowicz.
Let me take you on a brief journey through how I used "Profit First" to revolutionize my business finances, prioritize profitability, and achieve newfound financial stability.
Before diving into the details, let me paint a picture of my pre-"Profit First" reality. Like many small business owners, I often found myself at the mercy of fluctuating sales and inconsistent cash flow during some months. I despised feeling like money was tight or I couldn't afford something because sales were down.
I'll admit it – paying myself consistently was an afterthought, often pushed to the bottom of the priority list when sales were poor or expenses were high. And as for cutting unnecessary expenses? I should have been more diligent with this all along. Live and learn, right?
Enter "Profit First." This book introduced me to a revolutionary approach to financial management in business – one that prioritizes profitability, pays the owner first (yes, that's you!), and encourages ruthless expense reduction.
I decided to take the plunge and implement the core principles of "Profit First" in my own business. I have to admit that I didn't follow the system to a tee. Instead, I adapted it to fit my unique circumstances and preferences.
One of the first changes I made was to prioritize paying myself first, rather than last (or not at all). I committed to setting aside a fixed percentage of revenue each week as my salary, regardless of how sales were trending. When sales were slower, this was really difficult to do. I would often have this internal dialogue going on...should I or shouldn't I? I didn't want to take money out of the business if that meant it would affect the way I could run it. THIS IS NOT A GOOD WAY TO THINK! A simple shift in mindset transformed the way I treated money in my business.
So, what if I didn't really have the money to pay myself the way I should have been paid? That's when I started to look ay my expenses. If my business couldn't afford to pay me every single month, there was something very wrong.
I tackled the issue of unnecessary expenses head-on. Using a modified version of the bank accounts outlined in the book, I set up separate accounts for profit, owner's compensation, taxes, and operating expenses. Each week, I allocated a portion of revenue to these accounts, ensuring that I had clear visibility into where my money was going and what was available to spend.
The results were nothing short of remarkable. By adopting a proactive approach to financial management and embracing the principles of "Profit First," I saw significant improvements in cash flow, profitability, and overall financial stability. I was paying myself FIRST and I even had profit set aside!
So, if you're struggling with financial management in your business or feeling overwhelmed by the ups and downs of entrepreneurship, I encourage you to explore the world of "Profit First." Trust me, it might just be the financial lifeline your business needs.
Jor xo
P.S. I've also opened up a few weekly 1:1 small business coaching sessions. I would love to help you increase profit while creating time freedom. It's my jam 🖤
Click this link below to book!
