“What is a Profit First Professional?” I hear this question a lot. People see my designation on our website or notice it on my LinkedIn profile.
I never get tired of answering the question because it allows me to share something I’m passionate about — helping business owners realize more profit. And that’s why I became a certified Profit First Professional last fall. Now, along with the CPA work I love to do, I also coach people on how to manage their business cash flow better, reduce financial stress and take responsibility for every dollar their company earns and spends. The end goal is so they can do something great — and that’s run a more profitable business!
Putting Profit First: It’s Simple Yet Profound
Profit First is a concept penned by serial entrepreneur, speaker and author Mike Michalowicz. The big idea is, simply, that business owners pay themselves profit first. And while this might sound all well and good, it’s a marked shift for most business owners I know. I see far too many turning a blind eye to their profit and loss statement, balance sheet and cash flow statement. Instead, they manage their business by checking their bank account balance — and then making gut-level (and truly uninformed) decisions based on how much cash they see in the bank.
Do something great: Run a more profitable business.
What (and Who) is a Profit First Professional?
Most of the Profit First Professionals I’ve come to know over the last year are accountants or bookkeepers. They function as a strategic, trusted advisor and are an integral part of their client’s business success. They also have a heart for helping people and want to see an end to entrepreneurial poverty.
Getting Profit First-certified is a months-long and somewhat rigorous process. We’re tested on the theory and practical applications of Profit First, agree to implement the system in our own business, pass an audit process and complete three client implementations. When combined with the course training, the final exam ensures the public we attained a level of competence appropriate for professional practice.
What Does a Profit First Coach Do?
I work with clients, typically, for 6–12 months. While their business goals and challenges are often as unique as the owners themselves, I usually coach them in these areas:
- Smarter business banking. I encourage my clients to make profitability a habit in several ways. One key tactic is re-engineering the way they do their business banking, making the shift to five bank accounts instead of the one most businesses have. This may sound daunting, but it’s a core principle of Profit First and a throwback to what some of our parents or grandparents did — used separate envelopes for separate expenses.
- Better expense management. Together, we look at the client’s income, expenses and other financial records to determine their run rate. Typically, it’s a look back at year’s worth of activity. Then looking forward, we establish new targets for each key business expense area, which they will then manage to. This is why those separate bank accounts are so integral!
- Focus on profit from day one. By the way, the five business accounts I mentioned earlier are for Profit, Owner’s Pay/Payroll, Operating Expenses and Taxes, along with a primary Income account. As soon as we begin working together, I ask my coaching clients to set aside a certain percentage of business income for profit. Some choose 10%–15%, and some go with a more conservative 1%–3%. This off-the-top amount goes into the Profit account and can be used later for debt reduction, emergencies or as an owner’s bonus that acknowledges the hard work and risk of running a business.
- Commit to the “10/25 habit.” After the separate bank accounts are in place, the business owner moves money from the Income account to the other accounts on the 10th and 25th of each month. This twice-monthly habit neatly batches money transfers instead of trying to do it weekly or when there’s a rare free moment.
- Keep the business safe from financial mistakes. It’s easier to spend money if we see it’s available in a bank account. The magic in having five business accounts is they remove the temptation to spend money earmarked for another purpose. (That’s the time-test old out-of-sight, out-of-mind principle at work!) Separate accounts give the business owner a clearer picture of how much money is available for certain expenses, which informs decision-making.
- Manage tax obligations more effectively. Regularly transferring money to the Taxes account means there’s never a worry about meeting the next tax bill. Enough said!
- Quarterly profit distribution. Each quarter, my Profit First clients look at the amount of money that’s accumulated in their Profit account and then take out 50% as a profit distribution, with the other half remaining as a reserve. This distribution is similar to what large public companies do when they announce their quarterly earnings and distribute a portion to shareholders.
- Pay down debts. Eliminating debt gets our focus, too, because a healthy, profitable business has its debt obligations under control.
A Profit First coach is an accountability partner and a mentor in your corner.
How Could a Profit First Professional Help You?
If you ever worked with a personal trainer or another type of coach before, you know what it’s like to have an accountability partner and mentor. You get more accomplished havings someone in your corner. That’s a big part of what I do as a Profit First Professional — keep my clients accountable. The changes they take on are big and transformational. They need me answering their questions, cheering them on and reminding them why they’re doing the hard work in the first place.
If you’re at a point where you know you could be better organized and more thoughtful about your business finances, whether that’s spending less or feeling less stressed about the money side of things, let’s talk. I can answer questions you have about how we to bring Profit First into your business and the investment and combined work that’s involved.
Your first step: Schedule a complimentary 30-minute call with me. We’ll talk through your concerns and short- and longer-term goals. Then, we’ll make a plan for what support comes next.
Are you ready to focus on profit first? Together, we can make it happen.