The Profit First method focuses on evaluating your operating expenses and using your existing revenue to generate a profit. The foundation of this comes from the idea of flipping the formula because traditional accounting is failing small businesses.

In last week’s article, we discussed evaluating and maintaining operating expenses. Which discussed the importance of regularly reviewing your expenses to ensure that you are receiving the business value you expect. Utilizing your existing expenses for maximum business value is a great way to efficiently run your business without increasing costs.

Why Prioritizing Profit is vital to your business. You can sum up why profitability matters to a business in just one word: stability. Being profitable means that you and your staff can depend on your business to support your needs. Profit isn’t a bad word. Profit is good because it lets you keep doing what you’re passionate about doing.

While Parkinson’s Law is based on time management, this same law can be applied to financial management. If you are depositing all your revenue into a single bank account and then managing your business out of that single account, then what you are doing is creating a surplus mentality which can lead to needless spending.

The Profit First Allocations are based on percentages. So, at first glance you might think that the order of accounts is not important. Since all the Allocations add up to 100%, then the order in which the allocations are made should not matter. Right?

Like many business owners, you constantly worry about making ends meet. Making sure that your staff, rent, insurance, utilities, marketing expenses, and everything else is getting paid.

The yearly tax bill is the #1 expense that most business owners are unprepared for. When Tax Day rolls around every year, you hear from your accountant that you owe taxes, and the immediate reaction is “how is that possible? I never seem make any money; how can I possibly owe the government money?”

It's not uncommon for business owners to start examining their expenses and think they're spending too much. But don't go cutting expenses blindly - you don't want to become a cheap business owner and compromise your business effectiveness and efficiency. There are smarter ways to save money without harming your business.

If you are like most of the small businesses owner we work with, when you hear accounting, you think of long complicated reports and spreadsheets filled with confusing terms. This makes the process of reviewing and managing our books feel like quite the chore. And we all know what happens when we don’t like to do something? You guessed it. We just don’t do it.

How many times have you gone to work, completed your daily requirements and called it a day? The last appointment of the day has left so you do too. Many small business owners do the same thing they get lost in the “what I See” mentality where they end up becoming employees in their own business and start to forget about the important work on running the business.

Putting Profit First in your Business It sounds clear right? However, many business owners don’t put profits first. Often, we think we are profiting; I mean we worked all these hours how could we not be making money? Right. But when we finally get around to doing our books it’s like a smack in the face. The profits we thought we had been nowhere to be found. Which leaves us wondering what went wrong?