Successful Beginners Guide to the Profit First System

Transcription

1 Successful Beginners Guide to the Profit First System The key to creating any real change is that your desire must be greater than staying where you currently are. For me, that was stuck with a black-hole of a bank account; chasing my tail every month just to pay my bills; and a business that had not paid me in too many painful years. I had nothing to lose, except my business. If you are interested in creating a different money story for your business, here are the steps. made with

2 Successful Beginners Guide for the Profit First System by Connie Vanderzanden Profit and Business Mentor So by now, if you re reading with us regularly, you have heard of the book Profit First by Mike Michalowicz. Maybe you even cracked the spine and gave it a quick read. If you resonated with it, but found your Negative Nelly mindset kick in, you may not have taken any forward movement on implementing the new system. Today I am going to share the five basic steps of Profit First. This is the same basic info I presented in my very first webinar, in fact, it is the same exact system I used more than a year ago. Look: just because I am comfortable with numbers doesn t make this system any easier for me to implement, in fact I have the same struggles and hiccups with changing my habits and money story as you do. The key to creating any real change is that your desire must be greater than staying where you currently are. For me, that was stuck with a black-hole of a bank account; chasing my tail every month just to pay my bills; and a business that had not paid me in too many painful years. I had nothing to lose, except my business. If you are interested in creating a different money story for your business, here are the steps. 1

3 Step 1 Create smaller buckets, set-up bank accounts Work with your bank to set-up the following accounts and make sure to give them a job: name them so it shows on your bank statements, online banking, and on your accounting reports. If you love your bank, great - work with them to open the new accounts. Or look for a bank that has great online access; is easy for you to get to; and has low to no costs. Here are the suggested accounts to start with and their type. Profit savings account Owner s Pay savings account Tax savings account Operating - checking Revenue - checking My Story - I took my existing checking account and made that my revenue account since it was already attached to how I received money from my clients. Then I opened the new four accounts. All of my accounts are at the same bank, Umpqua. 2

4 Step 2 Timely, useable, accurate accounting info at your finger tips for planning purposes We recommend an online accounting tool to help automate the record keeping of the process. If you don t have a system, or don t trust your system, we recommend investing in a bookkeeper to help get you set-up and started on a firm path. Often this will be a one-time investment, or you can look at regular ongoing services as well. Next, adjust your chart of accounts so you create smaller buckets of expenses for tracking. I love how this looks; it is super easy to visually, and immediately, see what is included in each bucket and how it relates to your Target Allocation Percentages (TAPs). I also use this process for creating budgets. I work with my clients on three different budgets: Break-Even Minimum, Big Kahuna Goal, and your Growth Goals. As we ramp up, we use the Break-Even, that fine line in the sand that you won t fall below. Then as we see forward movement in our planning aim for the Growth Goal, since this one is the doable goal. All throughout the process we keep aiming for the Big Kahuna. 3

5 Step 3 Create starting target allocations using Profit First suggestions You have to just START! Find something comfortable 1%, $5 and create habit around contributing. Keep these amounts for 30 days; review and adjust as needed do this for the first 90 days which will be your first quarterly distribution NO stealing from the accounts, so it is better to start small and build up NO new debt, so any new charges must be paid in current month; make minimum payments on old debt How do you figure them out? Here are two options. Please note that it will take about 18 months to move from your starting point to your final Target Allocation. Invest in working with a Profit First Certified Professional to help evaluate your historical and industry info to establish your TAPs; OR Use your historical info - figure out what goes in what bucket; calculate your starting percentages; compare them to the Profit First average TAPs (it s in the book) by total real revenue; find a percentage that works for you - gradually moving from your starting numbers to the average or a custom TAP. My Story - Starting out with a cash loss each month, there was a lot of self doubt that I would have enough cash to allocate to anything. AND I followed my own advice and just started. When I started I was consistently short $5-6k per month just to cover basic costs. If I could find a way, you can make it work too 4

6 Step 4 Quarterly Distributions for loan repayments and fun money After three months of following the process do a quarterly distribution. Calculate 50% of the profit deposits for the last three months: If you have debt 90% of those funds will go to make a lump sum payment. Suggestion is to pay off your smallest debt first, so you get a debt-free win faster! After debt the remaining 10% is yours! My suggestion, get this in cash rather than just transferring it to your personal checking account. These funds MUST be used for something fun. No paying personal bills and don t put it in savings. You must benefit from it with some type of reward. If you don t have debt, then that 50% is all YOURS! Now go have FUN! REMEMBER, you only get 50% of the profit deposits for the last three months. The rest stays in the Profit account. After this account has approximately three months of overhead costs then you can use the funds for growth opportunities and may break it out into special purpose funds. 5

7 Step 5 - Rinse and repeat Now that you have three months under your belt, review where you are at and adjust your target allocations. Adjust and address any mindset items that came up or roadblocks. How can you adjust for this? Create a new plan for the quarterly, slightly adjusting your target allocations slowly moving toward the suggested Profit First TAPs for your revenue range. Work the process. Know that $h!t is going to come up as you change your habits and find ways to become aware of it so you can change it. As I mentioned, this is the exact same process I presented on the webinar and that I work clients through. Why? Because this is the same process I used and I succeeded. I did have support when I started this process, and that is also what I am recommending. 6

8 Wanna Chat? If you already work with a coach or have a tax professional to hold you accountable - GREAT! Use them. If you don t, and if you want to create Financial Freedom in your business starting right now, then perhaps it s time to find out what a Profit First Certified Professional can provide. Connect with me by clicking the button below. Get a Complimentary Consultation made with