One of my favorite TV shows is The Profit.
On each show, Marcus Lemonis meets with the owner of a struggling business.
Most of the people that have been featured on the show are at the end of their ropes.
They invested many years and an untold amount of money trying to achieve success as a business owner.
The show gets very raw at times as the business owners get vulnerable about the challenges their currently facing in their businesses.
Marcus spends some time learning about the businesses and what the business owners are struggling with.
Next he reviews their financial statements to get a better understanding of the health of the businesses.
Then Marcus makes them an offer to infuse his own money into the business in return for partial ownership in the business.
Marucs Lemonis is no dummy when it comes to business. Outside of his role on The Profit he has been extremely successful in business.
Marcus is the CEO of Camping World, Good Sam Enterprises, Gander Outdoors, and The House Boardshop.
To say Marcus Lemonis is a business mogul would be an understatement.
In watching The Profit, I’m reminded of the many businesses I’ve worked with over the last ten plus years.
Some of the people I’ve worked with have been very successful with business.
What has startled me is how many business owners struggle with money.
There is a reason why most businesses fail in the first five years of operations.
I believe the biggest reason businesses fail is because they never have a system for their business money.
Without a simple money system, they are always living from paycheck to paycheck.
Most businesses struggle in the beginning because they don’t have enough good paying customers.
Then the business evolves and it starts making money.
However, things get busy and the business owners stretch themselves too thin.
In order to buy back their lives the business owners start to hire employees.
Once a business starts to hire employees it starts to incur overhead expenses.
The combination of employee costs and new overhead expense puts a real dent into the profitability of the business.
This is the time where we find out if the business has the right pricing strategy in place for the business to continue operating.
Too often when people start a new business, they use a low-cost provider strategy.
They mistakenly think that if they price their services and goods lower than their competitors, then they will be able to grow their business.
They rationalize that their overhead expenses are lower than the big boys so lower prices make senses.
The business owners use the flawed thinking that customers love low prices.
Let’s break down this thought process for a moment.
The big boy companies are charging higher prices for a reason. The prices have to cover operating expenses, overhead, employee costs, pay to owners, taxes and profit.
The big boy companies got to be big boys. Their successful with the prices they offer to their customers.
If the big boy companies can be successful with their pricing, then it might be worth considering that you can be successful pricing similarly.
The worst way to build a business is buy using a low-cost pricing or budget strategy.
The first thing to consider when pricing your services is how much you the business owner need to make.
This is the Pay Yourself rule.
I learned this powerful money rule from the book The Richest Man In Babylon by George S. Clason.
The rule is beautiful in its simplicity.
PAY YOURSELF FIRST
For two years I ran my business completely ignorant of applying the Pay Yourself First rule to myself.
Finally, when I came to the end of my ropes and ran out of money, I remembered the Pay Yourself Rule.
Over ten years ago I set this up the Pay Yourself Rule for my business.
I wanted to make sure that I was paid before anyone else.
It’s my business after all, shouldn’t I be paid first?
My answer was a resounding YES!!!!
Here’s what I did. I went to my bank and set up a new business checking account and named it the Damon account.
From that day forward, every time a customer paid me, I moved 10% of that payment to my Damon bank account.
If I received $100 from my customer, I moved $10 to my Damon bank account.
Here’s how you can get started. Go to your bank today and open up a new checking account.
Name this your PROFIT account.
If you can’t do it today.
Set an appointment on your calendar to do it tomorrow or sometime this week.
As Larry the Cable Guy says Git R Done.