How Can Profit First Help Small Businesses?

The Profit First system is a fantastic fit for an entrepreneurial way of thinking given the constant stream of start-ups and entrepreneurs striving to carve out their own niche in business.

Start-ups frequently fail despite having new ideas because they employ antiquated accounting practices and have no understanding how to handle their finances in a way that will be advantageous to the business over the long term.

Modern business practices are everything but conventional, and a time-tested approach to math doesn’t really apply.

The conventional way that a business manages its money is:

Revenue – Expenses = Profit

Profit First, as you might be able to guess, rearranges this equation:

Revenue – Profit = Expenses

Profit First is an established system with proven results, not just an idea. Using the Profit First methodology, you pay yourself first and put aside money to grow the business, before you allocate funds to expenses.

This cash management system ensures that the business owner is always paid, no matter how small the income may be. It also gives business owners solid spending boundaries and ensures debts are taken care of before adding more expenses or cutting owner’s pay to pay bills.

After all, we don’t go into business to not get paid!

Well, all of that sounds tremendous, but how is it possible?

In the Profit First system, you pay the owner’s wage, profit and taxes first using set percentages of the total revenue gained. The remainder is allocated to expenses.

If your expenses do not fit into the allocated expenses budget, you will need to focus on aggressively reducing the expenses to operate within your means. A Certified Profit First Professional can help you do that!

Working with me as your money mentor (or any Profit First Professional), you can learn strategies for growing profits and reducing expenses. Even expenses you thought of as fixed can be reduced.

We have a natural inclination to spend all the available funds to maintain the business and pay our bills. We will therefore be forced to learn how to manage our operation within the budgets allotted if we are aware of the exact amount of money that is available to pay our expenses.

Profit First forces you to manage your debts efficiently, develop efficient operating processes, and make informed decisions that will grow your business.

It does take some adjustment and a good dose of discipline, but I guarantee it works – especially with the guidance of an accountability partner such as a Profit First Professional.