One of the most stressful and overwhelming challenges of running and building a business – is making sure YOU get paid.
When you are working flat out and there is not enough money in your business to pay you – it’s enormously stressful, frustrating and demotivating.
So what can you do about that?
You are the most important person in your business so set your business up so you always get paid.
One way to do this – is to implement Profit First from Day 1.
The Basic Principles of Profit First
One of the fundamental principles of Profit First is cash waterfalling.
💪 Set up multiple bank accounts and operate a cash waterfall system.
💪 Collect incoming cash into one account (AC#1) and at the end of each day/week/month allocate it to different pots (you’d allocate a percentage of your receipts into each of these accounts) :
💪 AC#2) owners pay account – to pay your wages, should be enough to cover your essentials otherwise your business is not a business just an expensive hobby
💪 AC#3) Owners profit – start small but get into the habit of putting a teeny bit away each time cash comes in to pay you a bonus each quarter or year. This is your reward for building a business that has generated profit so you build it up week by week, month by month and use to pay a dividend or a bonus to yourself each quarter or each year. You are only allowed to spend this on something nice – so it truly feels like a reward.
💪 AC#4) Taxes. Get into the habit from day 1 of saving for taxes and not waiting until the last minute to find the cash.
💪 AC#5) Bills account – what’s leftover is what you are allowed to spend on your business bills. If there is not enough money in this account then you can’t afford the cost. Find a way to earn more money to pay the cost or reduce the cost so you can pay it from this account. If you want to spend that £10k doing that super expensive but bloody brilliant training program, then you have to earn the money first to pay for it.
This is bootstrapping at it’s best and teaches strong financial disciplines from day 1.
It forces you to be creative and resourceful (traits that entrepreneurs have in abundance) but ultimately ensures you build a business with strong financial foundations, high-profit margins and no debt.
Oh, and you get paid. Which is nice!
What is Profit First?
A brilliant book written by a chap called Mike Michalowicz. It’s the book that every accountant reads and thinks – yep, been advising clients to do that for years wish I’d written a book about it! What Michalowicz has done with a stroke of genius is picked up the concept of cash waterfalling and beautifully packaged it into a whole movement that has taken the small business world by storm.
Buy the book, read it and take some time to action it.
If you want to learn more about profit hacks like this, come and join us in the Bloody Brilliant Business Club. We’d love to see you there.
If you want help to implement profit hacks like this – take action and join us in Profit Hackers!