A year and a half ago, I became a Mastery Certified Profit First Professionals.
For those of you who unfamiliar with Profit First, it is a philosophy based on the book Profit First, written by Mike Michalowicz.
With Profit First, you take your profits first in business.
By taking your profits first, you guarantee your business generates a profit.
In June of last year, I traveled to the Netherlands to attend a conference where Mike Michalowicz gave a speech.
While I was there, I had the chance to have a private conversation with him.
I asked him about the history of Profit First.
One question I asked him was when did he realize that Profit First was going to be a success.
He responded to me that quickly after the book went to print, he could tell that this book was going to make a big difference in business.
The book Profit First became a best seller and has sold a couple hundred thousand copies since it was published in 2014.
If you have never read Profit First, I encourage you to read the book now.
I believe so strongly in the power of the Profit First philosophy that I’d like to give you a free copy of the book.
Click here to claim your free copy of Profit First https://freeprofitfirst.com
Why do I believe so strongly in Profit First?
I believe in it so strongly because I’ve seen it transform my business and the businesses of many of my clients.
I started practicing Profit First in my business many years before Profit First was published in 2014.
I started my accounting business on July 31, 2008, after graduating from business school.
I had worked a few years in corporate and public accounting.
It was a valuable experience, but I knew I would never be fulfilled or happy working for someone else.
I knew in my early twenties that I wanted to own my own business.
I knew that I would be able to live the life of my dreams by owning a business.
So there I was in July 2008, and I took the big plunge to hang up a shingle and become my own boss.
Little did I know at the time the tsunami that would be hitting me smack dab in the face with the beginning of the Great Recession.
It was a scary time as I tried and tried to build a book of business clients.
It took much more time to grow my accounting business.
Fast forward two years in July 2010, and I was frustrated and hanging from a tiny thread.
I had depleted my personal savings and maxed out my credit cards, trying to launch my business off the ground.
I realized that what I was doing wasn’t working.
I knew I had to do something different.
I pondered for some time with my back against the wall.
What was I going to do to salvage my failing business?
What could I do to bail out the sinking ship that was my business?
Then as if by a strike of lightning, a moment of inspiration hit me.
I knew the cause of my problems instantly.
I had not been paying myself first.
I immediately changed the error of my ways and started paying myself first.
Fast forward a few years later when I learned about Profit First.
I learned that Profit First is the pay yourself process applied to business.
Implementing Profit First in my business filled in some missing links in my accounting business.
The principles of Profit First have enabled me to build my dream business.
I became so excited about Profit First that I became certified in Profit First, so I could help other business owners experience the dramatic transformation I received in my business and personal life.
Over the past year and a half, I’ve received many questions from business owners about Profit First.
Here are my answers to the top questions I’ve received about Profit First.
More bank accounts will result in a lot more bookkeeping work. Is Profit First really worth the effort?
Profit First is absolutely worth the effort!
While you have a few extra bank accounts with Profit First, the additional accounting and bookkeeping required to balance and reconcile the new bank accounts are minimal. Many times the additional accounting and bookkeeping work takes only five to ten minutes per month.
With Profit First, you are only reconciling the deposits and transfers that are coming from the Income account. All your expenses and payments are going to come out of your Operating Expense bank account.
The other bank accounts are a bank transfer that occurs on the 10th and 25th of each month. You’re only looking at one transfer that occurs on those days.
The new Profit First bank accounts are easy to use and reconcile. What is more important is the knowledge you’ll gain by knowing instantly how much money is allocated to your profit, your owner pay, your taxes and your operating expenses. This knowledge will have monumental effects on your business’s financial health.
Which banks are the best and most flexible in terms of creating multiple accounts (e.g., Income, Profit, Tax, etc.) without charging fees?
Business owners that implement Profit have had great success with credit unions, community banks, and some regional banks. Many of these banks and credit cards have accounts where you have no fees and no minimum balance requirements at these smaller institutions.
I’m a big fan of working with local banks and credit unions. With the local banks, often known as community banks, you’ll be able to establish a working relationship with your banker. There are many benefits to having a working relationship with your banker as your business grows.
Don’t be phased if a banker questions why you want to open multiple bank accounts. Many business owners have not set up Profit First yet, so the concept of Profit First may be new to them.
The banker may just not know the process of how Profit First works.
When you open up your multiple accounts, make sure you won’t incur fees even if the balance in some of your accounts will go or approach zero.
If the bank insists on charging bank fees or requiring high minimum balances, then you should consider another bank.
To find a local community bank, go here.
To find a local credit union, go here.
Why is the Tax allocation 15%? It seems very high. I want to pay as few taxes as possible. Shouldn’t I run up expenses to cut taxes?
This is a false myth about running a business. Incurring massive expenses so you can lower your tax bill is the same thing as spending $10 so that you can save $3. What sense does that make?
This type of behavior will ruin your business.
The goal of your business should be to run it as profitably as possible. A highly profitable business is the only way to achieve financial freedom with your business.
Should Profit First be implemented retroactively?
No. You will start Profit First with your very next deposit. You don’t need to go back retroactively and do bank transfers from the money you made in the past. You were not operating your business according to Profit First in the past.
The past is the past. Make peace with it and start today fresh with implementing Profit First in your business now.
My business has debt. I can’t be profitable until I pay off all my debt.
This is wrong. You will only be able to pay off your debt if your business is profitable.
Think about this for a moment. Debt is the result of expenses you incurred in the past that you didn’t have money to pay for. Consequently, you borrowed the money to pay for those expenses.
What you need to focus on now is making your business more profitable now, so you will have the cash to pay for those past debts.
You need to make more money in your business now than your business spends. This will give you the profit or cash to pay off those debts.
There you have my answers to the top questions about Profit First.
Profit First will transform your business from a cash eating monster into a money-making machine.
Get your free copy of Profit First by going to https://freeprofitfirst.com