Running a small business is tough, and sometimes it feels like you’re running a money pit rather than a money-making machine. You’re chasing revenue like a golden ticket to freedom, only to look at your bank account and think, “Wait, where did all the money go?” Spoiler alert: It’s gone into the black hole of expenses—where good intentions, high hopes, and even that last $500 mysteriously disappear.
Enter the Profit First system. It’s a little like putting on a life vest before jumping into the ocean. You’re still getting wet, but at least you’re not drowning. Profit First flips the way we usually think about money and forces us to prioritize profit before spending it on shiny things like new a new truck, high-tech gadgets, or (if we’re being honest) that never-watched course that was going to change everything. Here’s how it works and why you should stop trusting that one day the mythical “big sale” will suddenly fix all your problems.
Step 1: Set Up Multiple Bank Accounts (Don’t Panic)
First things first, we’re going to make you feel like a financial genius by having multiple bank accounts—no, not offshore ones in the Cayman Islands, but actual ones that serve a purpose. These include:’
- Income – Think of this as your money’s “waiting room” before it gets assigned a job.
- Profit – This is your “I’m smarter than I look” fund. It’s for you—and yes, you deserve it.
- Owner’s Pay – Because working 80 hours a week for nothing isn’t a badge of honor; it’s just sad.
- Taxes – Nobody wants to get a surprise letter from the IRS. Trust me, those aren’t the kind of pen pals you want.
- Operating Expenses – This is for everything else, like rent, marketing, and that coffee addiction that you’re sure helps productivity.
The beauty of this system?
Every dollar that comes in gets split into these accounts. It’s like hiring a bouncer to keep you from blowing your profits on “business necessities” like gourmet donuts or ergonomic swivel chairs.
Step 2: Master the Art of Allocation
Now that you’ve got the accounts, you need to figure out how much money goes where. This is where the magic happens. Let’s say you take in $100,000 a month (you go, business genius!). Here’s a basic allocation example:
- Profit: 5% – Because you’re running a business, not a charity (unless you are, in which case, never mind).
- Owner’s Pay: 30% – If you don’t pay yourself, your Netflix subscription is going to start wondering where you’ve been.
- Taxes: 15% – This is so the IRS doesn’t make you disappear like some sort of corporate Houdini.
- Operating Expenses: 50% – Now, this is where you get real. Whatever’s left after profit, pay, and taxes is all you’ve got to run your business. And trust me, you’ll suddenly discover a lot of things are not essential when this account gets lean.
Step 3: Stick to the Plan (No, Really)
Consistency is key. You’ll be tempted to sneak into that Profit account to pay for something “important,” but resist! It’s like going on a diet and deciding a donut is a breakfast fruit.
The more disciplined you are, the more likely you’ll actually see profit at the end of the day instead of just wondering where it all went. Here’s the fun part: Watching your profit account slowly grow is like seeing money you forgot you had, and no it’s not for re-investing in the business.
The Danger of the “Growth Trap”
Too many entrepreneurs are like that one friend who always says, “I just need to buy one more thing, and then I’ll have everything I need.” Spoiler alert: There’s always one more thing. Bigger doesn’t always mean better—sometimes, it just means more bills and a lot more stress. Don’t fall for the “growth equals success” myth.
The truth is, if you keep chasing growth without ensuring profitability, you’re just making more work for yourself. Kind of like owning 12 pairs of shoes but only ever wearing the same three. You want a business that runs lean and mean, not one that guzzles cash faster than a teenager guzzles red bull.
Why Profit First Works (And Why You’ll Love It)
Profit First isn’t just some complicated financial formula—it’s a system designed for people who hate spreadsheets, are allergic to accounting but love seeing actual money in their account. It’s all about human behavior. If you don’t see it, you won’t spend it. Simple, right? By taking your profit first, you’re creating boundaries for your spending. Think of it like putting the cookie jar on the highest shelf. It’s still there, but you have to work for it.
The best part? You’re no longer running a hamster wheel, hoping to one day “hit it big.” You’re making profit a priority right now. Imagine that! Paying yourself for the hard work you put in, while still keeping your business running like a well-oiled machine.
Conclusion: Time to Enjoy the Fruits (and Profits) of Your Labor
The Profit First system isn’t just about stacking money in your bank account. It’s about making sure that you, the business owner, get to enjoy the rewards of your hard work. Too many entrepreneurs grind away for years only to look back and realize they’ve built something that sucks up all their time, energy, and sanity.
By prioritizing profit first, you’ll finally have the freedom to stop obsessing over your bank balance and start building a business that serves you. Plus, you can finally give your friends a straight answer when they ask if you’re “actually making money now.”
So, go ahead—set up those bank accounts, start small, and watch your profit grow. And when you’re sipping a margarita on the beach thanks to your newfound financial discipline, remember: You earned it. Oh, and maybe send me a postcard.