For a Successful Biz, Put Your Profits FIRST
I used to work and work and work and wonder why there was never any money left in my business bank account to pay myself. I was burned out, working all the time, and not even profitable! Not a great way to live.
I loved (and still love) being a chiropractor. Helping people heal is one of my big life purposes, but for a while it wasn't financially sustainable. My family needed to eat and have a place to sleep, so I needed to change my money mindset. I didn’t want to quit, so I decided to get some coaching, and I read Profit First to inform my money management habits.
This book helped me increase profit in my business and bring more money home to support my family. It's also NOT a boring accounting book, but a very helpful (and sometimes funny) cash management system.
Having a profitable system in place actually makes me love doing my books. What a huge—and welcomed—change: I started seeing (and I continue growing in) profitability!
Why the Profit First method?
It's a cash management system that helps increase your profit! It begins by shifting to the Profit First mindset:
Focus on profit rather than expenses.
By taking a percentage of all income and setting it aside for profit, you'll have a guaranteed profit at the end of the month. It's a game-changer for improving your financial situation and growing your business.
Here’s how you put Profit First:
Go down to your bank, open a new business savings account and call it: PROFIT.
For every dollar that comes in, put 1% into the Profit account.
At the end of the quarter, throw yourself a little profit party! Buy yourself a new bag, or take yourself to a local spa and treat yourself to a much deserved celebratory massage.
What’s it look like in action?
If your business collects $5000 a week for 12 weeks, and you set aside 1% a week for profit, you’ll have $600 of profit at the end of three months. If you set aside 5% a week you’ll have $3000 of profit!
But that’s just one part of managing your business’ money. You also need to:
Set up your money management system.
The best money management system that I’ve found is to set aside a percentage of my weekly revenue into one of five bank accounts.
Plan for profit with these 5 bank accounts:
1. Income
This is a checking account where all incoming deposits are made. Deposits can be checks, cash and direct deposits from your EHR payment processing service. Income could be patient payments for services rendered, insurance payments, products sold, rental income or online course sales. The sky’s the limit here!
2. Profit
This is a biz saving account. Start with setting aside 1% of all income into this savings account. Assess your business needs quarterly and see if you can increase your profit percentage by 1% percent. This means decreasing your contribution to OpEx by 1% as well. The goal is to slowly increase the money you save and decrease the money you spend.
3. Tax Savings
When you take a percentage of all income and set it aside for taxes… guess what you have at the end of the year?
Plenty of money to pay your tax bill!
This is a biz savings account. Start with putting 15% of all income into a Tax Savings account.
BTW: I am not a CPA. Please be sure to talk to your CPA to determine if 15% is the right amount for your tax bracket.
4. Owner’s Pay
You want your business to pay your personal expenses, right? For every dollar that comes into your business bank account, put aside a percentage of all income into this biz savings account.
Assess your business needs quarterly and see if you can increase your Owner's Pay by 1% each month. Slowly increase the money you take home while decreasing the money you spend on expenses.
5. Operating Expense
This is a Biz Checking account. By limiting the money in your Operating Expense account to some predesignated percentage, you limit how much you can spend. What's left is what you can use to pay your practice bills like rent, payroll, supplies, software, etc.
It takes time and nuance to get these percentages right. Assess your business needs quarterly and see if you can decrease your Op Ex by 1% each month.
Plan for profit with systems for success.
When you take a percentage of all income and set it aside for profit…guess what you have at the end of the month? PROFIT! But you’ve got bills to pay, too, so you need to put together a system for managing all aspects of your business.
And yes, you DO need 5 different bank accounts. For more guidance on this system, feel free to read the book Profit First by Mike Michalowicz. You can also see what I delegate to each of my 5 accounts here.
The long and short of it is: Do you want profit? Learn to put it first. My chiropractic practice has been growing since I made this change. Yours can, too.
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Since 2018, I’ve been mentoring chiropractors as they start, build, and scale their brick and mortar practices to create more profit in their biz and more joy in their lives.
Need some help getting your mind wrapped around making a profit first? I can help.
Schedule a free 15 minute consultation to see if we’re a fit.