How profit first helps you to win
Handle your business financials like your personal financials
Read Time: 3.20 Minutes
Let's talk through one of the most important topics in business at all...
Let's talk about making profits.
You may ask yourself, this is a clear topic. You start out to get revenue in, then you pay your expenses you need to operate and afterwards you tax the remaining money.
There it is your profit.
Sounds easy but achieving profits is for many and even the most companies out there a hard job.
Over 50% of businesses never make it after 5 years. And many from the other bracket are not driving in great profits as well.
But if this is true, how do most entrepreneurs make money at all?
Often they run and operate their company for years and turn in a bit of profit to make ends meet on their own. And then, finally when they sell their business making some profits.
There is nothing wrong with this, but just to give you an idea. Any entrepreneurs never make it to selling their business at all so they never have a big payday.
Their business runs them, not the business for them.
Often the answer to this is to just grow out all of your profit concerns. Means they sell more, grow their revenue and have bigger numbers on their balance sheet.
But more growth also brings often more expenses. And therefore not more profits. In the worst case just more hassle and risk.
But what is the answer then?
That's why we need a profit first revolution
Profits first is the business version of managing your finances and paying yourself (the owner) first.
Like in personal finance, where every guru tells us, when your monthly incomes arrive in your bank account to cut your savings out straight away and book them to another account.
This framework comes with some great advantages. And you easily can find out how high your profit margin (saving budget) should be by working through your past year in business.
First you build a pile of money. Second, your budget for expenses stays tied, therefore you have an incentive to grow your business more lean. Third, you start to earn profits now and not after a decade long reinvestment and growth strategy.
Just to remind you, after all you still can reinvest your freshly made profits for good ideas if you want, but at least you have now money to plan with.
And you don't have to wait until you maybe sell your business somewhere in the future to get a payday yourself.
As a cool side effect. Offers for highly profitable businesses are usually way better than high growth but also high expenses companies.
So start a revolution and pay your profits first. Your work life balance and better stress levels will pay a huge dividend too.
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