Boost Your Business Profits with Profit First
As a business owner, it is highly likely that you are always looking for ways to increase your profits and take your business to the next level. One method that has gained a lot of popularity in recent years is the Profit First System. In this article, we will explore what the Profit First System is, how it works, and how it can help you boost your business profits.
Boost Your Business Profits with the Profit First System
What is the Profit First System?
The Profit First System is a cash management system created by Mike Michalowicz. The system is designed to help business owners prioritize profit and ensure that they are always making a profit. It does this by changing the way businesses manage their cash flow.
Traditionally, businesses manage their cash flow by tracking revenue and deducting expenses to arrive at a net profit. The Profit First System flips this model on its head. Instead of tracking revenue, businesses track profit first. They allocate a percentage of every sale to profit, and then deduct expenses from what is left over.
When I first implemented this in my businesses it was a completely mind-blowing game changer because I used to always ask my accountant where is this profit I am paying tax on that I do not have in my bank account. I didn't understand the old way of accounting and it left me confused and frustrated. Then enter profit first and now it all makes sense.
If your business is doing great you get more profits, if it is not you see what you need to adjust quickly and get yourself back on track.
How Does the Profit First System Work?
The Profit First System is based on the idea of Parkinson's Law, which states that work expands to fill the time available for its completion. In the case of business, expenses tend to expand to consume all revenue. By taking profit first, the Profit First System ensures that businesses prioritize profit and limit their expenses to what is left over.
To implement the Profit First System, businesses first need to determine their target profit percentage. This is the percentage of every sale that is allocated to profit.
For example, if a business sets a target profit percentage of
10%, then 10% of every sale is allocated to profit.
Once the target profit percentage is set, businesses need to create separate bank accounts for profit, owner's compensation, taxes, and operating expenses.
Every time a sale is made, a percentage is allocated to each account based on the target percentages.
For example, if a business sets a target profit percentage of 10%, an owner's compensation percentage of 50%, a tax percentage of 15%, and an operating expenses percentage of 25%, then for every $100 sale, $10 goes to profit, $50 goes to owner's compensation, $15 goes to taxes, and $25 goes to operating expenses. These are just examples you have to adjust your percentage allocations based on what works for you in your business. Every industry is different but every business needs to have actual profits to be a healthy viable business.
How Can the Profit First System Help Boost Your Business Profits?
The Profit First System can help boost your business profits in several ways.
First, by prioritizing profit, you are always ensuring that your business is making a profit. This can help you avoid the common pitfall of businesses that focus on revenue instead of profit.
Second, by limiting your expenses to what is left over after profit is taken, you are forced to be more mindful of your expenses. This can help you identify areas where you can reduce expenses and increase profits.
Third, by allocating a percentage of every sale to the owner's compensation, you are ensuring that you are paying yourself first. This can help you avoid the common pitfall of business owners who neglect to pay themselves. This is very helpful to your overall personal mental health and well-being not just the health of your business.
Fourth, by allocating a percentage of every sale to taxes, you are ensuring that you have the funds to pay your taxes when they are due. This can help you avoid the common pitfall of businesses that fail to plan for taxes and are hit with unexpected tax bills.
Fifth, by allocating a percentage of every sale to operating expenses, you are ensuring that you have the funds to cover your business expenses. This can help you avoid the common pitfall of businesses that fail to plan for expenses and run into cash flow problems.
In conclusion, the Profit First System is a cash management system that can help you prioritize profit, limit expenses, and boost your business profits.
By taking profit first, you can ensure that your business is always making a profit, and be more mindful of your expenses.
To learn more about profit first check out this week's Beyond Common Business Secrets Podcast episode with Kasey Anton, the founder of Spark Business Consulting and author of "Profit First for Restaurants."
In this episode, Kasey shares her expertise on the Profit First system and how it can transform your business into a cash-generating machine.
Kasey's own experience with the Profit First system changed her business and life. She was struggling to keep her restaurant afloat and constantly stressed about finances until she discovered the Profit First system. By prioritizing profits, she was able to turn her business around and eventually sell it for a profit.
Now, she's sharing her expertise with small business owners everywhere.
During the podcast episode, Kasey shares tips and insights on how to implement the Profit First system in your own business. She stresses the importance of setting realistic revenue goals, determining your target profit percentage, and tracking your finances meticulously.
Kasey also addresses common misconceptions about the Profit First system and shares success stories from businesses that have implemented it.
One of the key takeaways from this episode is that prioritizing profits doesn't mean sacrificing your business's growth. In fact, it's quite the opposite. By focusing on profits first, you're able to make smarter financial decisions that will lead to sustainable growth and success.
So if you're ready to take your business to the next level and start generating more cash flow, tune in to this podcast episode featuring the inspiring Kasey Anton. With her insights and the Profit First system, you'll be well on your way to achieving your financial goals and building a successful business.
I would like to leave you with this final thought when it comes to profitability. Keep your mindset on building abundance and gratitude into all that you do.
Many business owners spend their days in stressed-out and overwhelmed and miss out on potential opportunities that can help them increase profits and lead more joy-filled lives.
Don’t miss out – tune in today and discover how you can set yourself up for profits from the beginning to make your business more successful in the long run.
With Love & gratitude
Tracey Watts Cirino
Business Success Strategist
#1 International Best-Selling Author & Speaker
Host of Beyond Common Business Secrets Podcast
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