Ever pondered on the unconventional accounting formula: sales – profit = expenses? As a host of a podcast that seeks to empower businesses, I recently dove into the Profit First principles and how flipping traditional accounting on its head will prioritize profit.
In this episode, I shared:
- Introduction to Profit First principles
- Importance of intentional profit in businesses
- Use of a multi-account bank system for effective financial management
- Setting aside money for taxes, emergency funds, future growth, and other expenses
- Personal examples of how Profit First has helped achieve financial health
- Mention of the Profit Implementer program for guidance on implementing Profit First
- Flipping the traditional accounting formula to prioritize profit
- Importance of protecting profit through a multi-account bank system
- Setting up a regular transfer schedule for allocating funds to different accounts
- Starting small and gradually increasing percentages over time when implementing Profit First
The key moments in this episode are:
- [00:01:48] – The importance of intentional profit
- [00:03:05] – Using a multi-account bank system
- [00:07:56] – Getting money into the accounts
- [00:12:47] – The importance of starting small
- [00:14:00] – Exercising the profit first muscle
- [00:15:16] – Real-life success story
“We don’t want the business owners to have profit as a crumb, something that’s just left over at the end of the day or the week or the month or even the year. We want your profit to be intentional.”
Flipping the Traditional Accounting Formula
Profit First, flips the traditional accounting formula of sales minus expenses equals profits. Instead, it proposes a new formula: sales minus profit equals expenses. This shift ensures that profit is not an afterthought but a deliberate goal for small business owners.
The Power of a Multi-Account Bank System
One of the key strategies is the use of a multi-account bank system to manage finances effectively. It’s important to set up a general operating account, a profit account, a tax account, an emergency fund, and a future growth account. By separating these funds, business owners can make better financial decisions based on the available balance in their operating accounts.
Set up a regular transfer schedule, such as every Monday morning, to allocate funds to the different accounts. Profit First has helped my clients achieve their financial goals, such as paying for a swimming pool or saving for a new house.
Starting Small and Growing Gradually
Start small and take baby steps when implementing Profit First. I believe that setting businesses up for success is crucial and that gradually increasing percentages over time is the key.
Comparing Profit First to exercising a muscle, it needs to be practiced and strengthened consistently. I share stories of members who have successfully implemented Profit First in their businesses, resulting in improved financial health and the ability to make profit distributions and invest in growth.
The Transformative Power of Profit First
I’m grateful for the opportunity to share Profit First principles and encourage listeners to read the book and explore the transformative power of Profit First in their own businesses.
Get a free digital copy of my book, “Your Path to Profits,” which provides guidance on implementing Profit First in a business, setting aside money for taxes, emergency funds, future growth, and other expenses.
The Profit First principles are a game-changer for businesses, transforming the way they manage their finances and prioritize profit. By implementing these principles, businesses can achieve financial health and set themselves up for success.
Whether you’re a small business owner or a seasoned entrepreneur, I encourage you to explore the transformative power of Profit First in your own business. And remember, start small, grow gradually, and prioritize profit.