I’m here today to talk to you about Profit First in Five Minutes, hopefully five minutes, let’s keep our fingers crossed. My name is Lisa Dickson. I’m a chartered management accountant and profit hacker. So, is your business a cash eating monster? You wish it weren’t, but it is. Do you always get paid last, or least? There’s nothing left or not enough for you after you’ve paid your bills, your staff, your debts and your taxes. It’s not a very nice situation to be, and this is what we call entrepreneurial poverty. You are the most important person in your business, but you get paid last or least. So, how would you feel if we could transform your business and turn it into a lean, mean, money making machine? That’s for the purpose of Profit First, a book written by a chap called Mike Michalowicz. This is effectively a cash management system where you can learn how to put your profits first, not last.
So, the traditional view of accounts and cash management is sales, minus expenses, equals your profit, and we tend to focus on what comes first. So, we focus on sales and we grow them, even if they’re not profitable. We focus on our expenses and we pay them, even if they’re not necessary, and then there’s not a lot left over for profit because we are not profit efficient. It conflicts with the entrepreneurs natural behaviour, who tends to spend money based on their bank balance or the available capacity on their credit card. They use their bank balance to make their spend decisions. So, you get into a sales trap, where more sales is more cost, it’s more responsibility, more stress, more time lost, and more loss overall. What happens is the more you grow, the more profit you’re losing, and the more unprofitable the business becomes, and you work harder and harder and harder, but not necessarily smarter, and not profitably. That is a real challenge for the small business owner, particularly at the moment with today’s challenges.
So, Profit First turns that equation upside down. We look at sales, which must be profitable, minus profit, IE yours first, less expenses. This complements the entrepreneur’s natural behaviour, and profit becomes a habit and not an event. So, first of all, we prepare a profit plan. We set out your objectives for profit, yours and your businesses. Second, we work on your cash waterfall. So, we take all of the cash that comes in, and we waterfall it using fixed percentages between a profit account, an owner’s pay account, taxes accounts, and expenses accounts. This works on the basis of Parkinson’s Law, which is the more you have, the more you consume. So, if you are wanting to lose weight, you take smaller plates and smaller portions. If you had a packet of cookies in front of you, versus three cookies in front of you, you’d eat the packet. If you had three, you’d eat three. So, the more you have available, the more you consume.
The same works with money and finances. So, if you put cash into smaller pots, and make those pots very clear what they’re intended to be spent on, you’d have to learn to work with those smaller pots. So, you can’t spend money from the income account, you can’t spend money from your profit account, because you’re stealing from yourself. You can’t take money from your owner’s pay account because that’s what you need to pay your expenses. You can’t take money from your taxes account because that belongs to HMRC. So, you can only spend the money that’s in your expenses account. So, the premise of Profit First is, if you can’t pay for it, your business can’t afford it, or not yet anyway.
So, profit becomes a habit. When your expenses pot becomes restricted and controlled, you have to get creative. You have to get resourceful, and you have to start being ruthless in the relentless pursuit of profit, in order to make your profits and your business and your sales grow profitably. The outcome of this is there’s more profit for you, more profit to pay your taxes, more profit for your expenses, more profit to grow your business and more profit to manage your own dreams, to fund your dreams. So, profit pays for our dreams, and without it we can’t fund them. We can’t live them.
So, we have two choices. You can either go it alone, read the book and implement it yourself. Or you can join us in Profit Hackers. Profit Hackers now meets Profit First, so we’re bringing the Profit First principles into Profit Hackers. And looking at the three pillars of profit, the structure, the systems, and the savings that you need to put into your business to put your profit first. So, Profit First is just one of the many, many tools, tricks, hacks and strategies that we have in place to make sure you are putting your profit first. So, join us today. Profit Hackers Equals Profit First, and we’ll see you there. Caseron.co.uk/profithackers. I’d love to see you there, and that’s me done. Profit First in five minutes. Speak to you soon. Have a profitable day. Bye