What is Profit First and How Do I Use It?
Let’s talk about the Profit First method.
You might be wondering, what in the world is Profit First!?
Great question - it is a business finance management method that was created by Mike Michalowicz. He says that we should strategically separate our revenue each month into set percentage buckets to make the bookkeeping experience totally easy! Great, right!?
So let’s come up with a scenario… You had a 10K month? But how much of that actually went into YOUR pocket!?
I’ll show you below...
Owners Pay 50% - $5,000
Profit Account 5% - $500
Taxes 15% - $1500
Operating Expenses 30% - $3000
Mike talks about separating your monthly revenue into different accounts. Always pay yourself first, budget for expenses, save for taxes and then give yourself a FUN quarterly bonus.
Awesome, right!?
Obviously, this is the super-simplified version but for more information, I highly recommend that everyone reads his book: Profit First. This changed my life as a business owner!
So why is this method so important?
I see more often than not, especially in the online business owner space, that we aren’t paying ourselves FIRST! Instead, we invest in all of the things like brand shoots, websites, VA’s, social media managers, business coaches, and masterminds…
News Flash: These investments are not bad! I have personally invested in them. It’s knowing when the BEST time to invest in them is.
We buy into this notion that we will not be successful without those things and they are just a part of growing a business. It’s better to believe in yourself, know what you can afford now, and plan, budget, and save so you still bring in profit while building your business!
Don’t get caught up in comparison mode, YOU are the master of your income. And remember if you see those other entrepreneurs posting they had a 10k month...question what they had to spend to get there.
