Why You Need to Implement Profit First in Your Fitness Business
I was frustrated, feeling like I was letting down my clients until I implemented Profit First in my business. We’d have a meeting with a client and we’d go over the Profit & Loss line-by-line; I thought they got it and we made good decisions together. Then I’d go away for a month or even a week and when we’d talk again we would be having the same conversation as the month before. This happened month after month, week after week, meeting after meeting.
Prior to implementing Profit First, or even reading it…I’d been working with entrepreneurs for nearly six years and in that time I’d met very few who understood how they could be making money on their Profit and Loss Statement but not have any money in the bank. And even fewer business owners could analyze a balance sheet or even knew a statement of cash flows existed.
Like I said…I was frustrated, feeling like I was letting clients down. And yet, they’d tell us we were doing a great job explaining accounting to them and blamed their own lack of follow-through or impulse decisions. And I wondered, “What else is there? How can I change your behavior?”
Then I read Profit First and realized I didn’t need to change their behavior, just leverage it, but on top of that, if we implemented this system together, then they could understand their own financial position every single day without me being present.
The Profit First System
I love systems. Marketing systems, client onboarding systems, planning systems, team building systems. You name it and I have a system for it. Even our personal finances. But business finances, not really, until Profit First. I was advising clients using a Profit and Loss, Balance Sheet & Statement of Cash Flows but there was no system for an entrepreneur to implement across all industries or so I thought.
I’d even had my own business financial crisis due to a lack of system. When I prepared our own taxes in Spring of 2014 I had not saved enough to cover our own taxes. Oops! I had been advising clients to save 10-25% of gross revenue in order to cover upcoming taxes but I was not doing the same. I immediately started saving 10% of our gross revenue and was able to cover the tax bill in the Spring of 2015. But, that didn’t feel like a system to me. It was the best estimate to save for taxes. But, it still wasn’t helping cover other expenses let alone make a profit and it wasn’t guaranteed.
Enter Profit First. A proven system that not only saves for taxes but helps manage and predict cash flow. It reduces our human psychological and spending tendencies (more on that below). And, it provides immediate feedback on the health of a business. Best of all, when implemented 100%, it guarantees a profitable business.
This was a system I was excited to implement into my own business and did so within 2 weeks of reading the book I had implemented Profit First…it was that easy! I was also excited to introduce this to clients and implement Profit First into their businesses…I also did that within 2 weeks of becoming Certified.
It’s a simple system, collect money, allocate money and spend money, repeat. But that definitely doesn’t make it easy. It’s a learning process and we’re here to support you each step of the way.
The Psychology Behind Profit First
I could have been a psychology major – except I don’t like research. Reading about or listening to lectures on psychology all day is enjoyable for me. One of my first clients even told me I would have made a good therapist. Early in my practice, I would go to his office every week and he’d come in from the shop floor and talk to me for hours some weeks. We agreed I’d keep working in his books and he’d just talk and I’d listen.
Every once in awhile I’d ask a question and he’d begin to think about his business just a little differently. He always came up with the answers to his own questions after I’d ask a question or two and because he came up with the solution he had more ownership in it. I enjoyed helping in those little ways.
But how does this relate to implementing Profit First?
Mike Michalowicz, the creator of the Profit First system, says studying human behavior and reading psychology journals is one of his hobbies. I don’t think I’d go that far but I do love listening to him teach us Profit First Professionals what he has learned.
And almost the entire Profit First system is based on the psychology and human behavior patterns Mike has learned. Bank balance accounting leverages our human behavior to believe the balance in our online banking is our available balance to spend on our business.
Parkinson’s Law is the theory that we will spend every penny we have in our bank account or use every second of the time we are given before a deadline. By creating many different smaller bank accounts for our business we create the idea of eating from small plates. This limits the human behavior of spending everything we have.
Eating our vegetables first. Or, set aside the profit for our business into a separate account before we pay any operating expenses – psychology. Removing the temptation to rob the profit or tax account to cover operating expenses in slow time – psychology. These are just a few examples of the psychology behind the Profit First system.
The biggest one, though, might be the way we implement Profit First. You are not going to figure out where you are going wrong and fix it 100% tomorrow. We will work with you to figure out the baby steps to get you where you need to be. It’s natural to get scared when the changes are too big, so we take baby steps and make it a little easier and less scary to get your business profitable and healthy.
Just like running a marathon – you won’t do it tomorrow, but you can start to work up to a marathon in just a couple of months. Maybe the only profit you can plan for is 1% tomorrow but we can have you at a healthy, profitable business within 6 quarters if you’ll just start with 1% tomorrow.
It’s An “Accounting System” Written by an Entrepreneur
Profit First doesn’t have any “accounting-ease” in it. The \accounting words I knew are what I learned in school. And, while we were trying to make that into everyday language, we weren’t succeeding.
But, Mike isn’t an accountant so he doesn’t know that language either. He has learned some overtime and when he does use it in the book it is explained the way he had to learn it, from no accounting training so it 100% resonates with entrepreneurs and my clients. And there is an example in the book to go with every single methodology, principle, and practice. I finally had an accounting system written by an entrepreneur for entrepreneurs that entrepreneurs understood.
By implementing Profit First in my business, my life became more fulfilling, less frustrating and simpler (not always easier). And my clients have a lot less frustration and ridiculously increased confidence when it comes to their finances, both business and personal. Another win-win reason we had to implement Profit First.
Are you ready to implement Profit First in your fitness business?
Connect with Shannon:
Want to learn tips and tricks live with Shannon? Join the Facebook Group where she goes live every Wednesday at 8 pm EST to talk about these topics.
**We help stressed and struggling fitness business owners transform from surviving to making a consistent paycheck. Learn how to improve your business finances with our Keep More Money Method. Sign up now for our next FREE group by clicking HERE**
Shannon Simmons, a 10-year business owner, and 5-year Profit First Coach is the owner of Netbooks Accounting Services, LLC. She is one of the original Profit First Professionals when the concept was created by Mike Michalowicz.
NetBooks is your gym and fitness center’s business partner in achieving levels of profitability, accounting integrity, and financial reporting that will allow your business to do more than just thrive but to achieve the highest levels of profitability.
Our professionals are intimate with the fitness market and will guide you through creating the right plans, managing your operations and accomplishing your goals. Think we might be a good fit? Click Here to find out!