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Implementing the Profit First Method – A Step-by-Step Guide for Female Entrepreneurs
Putting Your Financial Success First
In our previous blog post, I introduced you to the Profit First Method and highlighted how it can transform your business's financial landscape. Today, I wanted to give you some practical steps of begining to implementing this method in your business.
Step 1: Rip off the plaster
IE. assess your financial position. Before you begin, take a look at your current financial situation. Use a spreadsheet, a scrap of paper, whatever works for you but note down your average monthly revenue and expenses. This will serve as your starting point for implementing the Profit First Method.
Step 2: Determine Your Allocations
The heart of the Profit First Method lies in allocating your revenue to different accounts. Mike Michalowicz suggests the following accounts:
Income Account: All revenue comes into this account.
Profit Account: A percentage of your revenue (start with a small percentage, like 1–5%) goes into this account.
Owner's Pay Account: Allocate a portion of your revenue for your drawings ( salary).
Tax Account: Set aside a percentage for taxes.
Operating Expenses Account: Cover your business's operating expenses from this account.
Step 3: Open Separate Bank Accounts
To ensure that funds are appropriately allocated, open separate bank accounts for each category. This physical separation creates a visual representation of your business's financial health and prevents accidental spending. It’s not as time consuming as you think. A simple call to your current bank and they should be able to do this over the phone. Some accounts even allow you to have separate “ pots” off your main business account exactly for purposes like this.
Step 4: Regular Allocations
On a regular basis (I like once a week on a Monday morning), allocate your revenue to each account based on your predetermined percentages. I choose to have a Money Monday, because who the hell wants to look at their finances on a Friday 😆
I created my Monday morning Profit Makers Power Hour for this very reason. We have been running for over 2 years now and it amazes me how many woman come along and dedicate time to working on some aspect of their finances. You don’t have to be using the Profit First method to join, I just wanted to create a safe co-working space where woman can talk about money without being judged, where they can ask questions without fear or embarrassment. It’s completely free, and there is no pressure to attend every week. If you fancy joining us, click the link here to get your name on the list : https://www.financialgrowthacademy.co.uk/power-hour-signup
Step 5: Adjust and Refine
Over time, you may need to adjust your allocations based on changing circumstances. Start small and make changes as and when you need to. The key is to consistently prioritise profit while managing your expenses responsibly. I don’t believe in cutting every expense and being too lean, if you are getting a valauble return on that expense, then in my opinion, it’s necessary.
One of the biggest challenges I hear from business owners when it comes to implementing the Profit First method is simply getting started. I promise, it's easier than you think. Start small, stay consistent and if you need a little cheer-leading. Come along to my free weekly Profit Makers Power Hour and hit me with your questions.
Click here to join us next time.
Hope to see you there, Jo xx
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