There are several mistakes that a business owner can make while implementing the Profit First system into their business. And chief among them: not following the instructions to a “T.”
A bit about me: My wife loves it when I cook (which I could do more often), and she often likes what I cook. And I tell her, “I don’t cook. I simply follow the instructions.”
Now I’m nowhere near my mom or grandma’s level of culinary genius; they don’t use or need measuring utensils the way I do. But, my food almost always comes out good because I follow the instructions to a “T,” despite my lack of experience.
The same is true for following the Profit First system. It works well. And I suspect you know it works well too, or you wouldn’t be reading this article. It works because it’s based on time-tested, solid financial principles.
(It also works for personal finances, if that’s something you struggle with.)
Now, in terms of which points in the system should be adhered to the most closely, at the top of the list is limiting business spending to what’s available in the OPEX account.
In my humble opinion, being able to keep business spending to what’s available in OPEX (i.e. making the hard decisions when it’s low, avoiding using funds from other accounts to handle the business’s spending, etc.) is the crux of the entire system. If everything else is done correctly except for compromises in this area, you will not get the promised results. It’s that simple. We guarantee our profits by keeping strict limits on what the business can spend as a percentage of revenue.
It is super important to be watchful and vigilant over monitoring your business’s monthly expenses. We must be proactively innovative and creative when it comes to limiting our expenses. I’m not suggesting we be cheap, but we should cut all unnecessary spending and make sure we are receiving maximum value for every dollar spent. And if it comes to it, we must make the hard choice to cut or reduce whatever is necessary to stay within the amounts of the OPEX account whenever there are more expenses than cash available within that account (with emphasis on “within that account”).
Life will happen, and there are times when we’ll have to adjust, although not frequently. And that’s OK. But there are also ways that we can preempt large or unexpected expenses:
So, follow the system. Don’t take shortcuts when implementing Profit First. The system is already simple and broken down to its simplest form for maximum results; there’s nothing added to it that isn’t necessary. If you want the results that the system promises, just follow the system and instructions to a “T.”
If you need help implementing Profit First in your business, let’s talk!
The best way to identify your Next Vital Need is to take the assessment, but if you’re wondering what that even means then read on!
You’ve been in business a while but there always seems to be an urgent task that needs to be done. And every time something comes up, it derails you. This just might be what you need to fix next in your business.
Everything in business feels like a priority, especially when you have team members, customers, equipment, marketing, and so much more pulling you in different directions. But the reality is that there’s a hierarchy to where you need to focus your energy.
It’s up to you to determine where you are and how to proceed.
We’ve talked before about your business hierarchy of needs, but let’s look at a quick rundown:
Logic tells you that you can’t possibly work on all these very important parts of your business at once. Trying to do this, as many business owners often do, will dilute your time, energy, and focus, and you won’t fix anything very well.
At the same time, your business will break down at the weakest link, the need that is in most need of help. This is what we call your Vital Need. And once you identify it, you can throw all your energy into fixing it so you can move on to fixing your next Vital Need. (It never stops, but thankfully it does get easier.)
So how do you identify your Vital Need? Using Mike Michalowicz’s Fix This Next system.
Take a look at the Business Hierarchy of Needs. Is your business meeting your sales needs? Your profit needs? Check off which needs you’re adequately meeting.
What’s your lowest level unchecked core need? For example, if you checked order and sales but not profit, then profit is your core need right now.
Now that you know that your core need is profit, identify solutions to that need. Brainstorm a list of how you can increase profit and then implement them. (Of course, we recommend adding Profit First to that list.) As a side note, increasing sales should likely not be on your list of solutions in this example because it’s not your core need.
Once you’ve implemented your solutions to your core need, your core need will change. So you repeat this process as you uplevel your business.
Once you’ve reached Impact and Legacy, chances are you may find that your weak link is Sales or Order again. This simply means that you’ve grown and scaled to another level, causing something to break at a more foundational level. Don’t be discouraged; celebrate that you’re growing!
Sometimes going through this process alone is a challenge. We have a tool that can help you determine your next vital need or core need, and we offer coaching to walk you through the process of Fix(ing) This Next.
It’s no secret that time management is crucial to your success as a business owner. If you find yourself wearing all the hats all the time, you know that you need to bring on new team members. But how do you know when it’s time to bring on your next hire, and how do you make the most of your new employees once they get there?
Growing your team, if done correctly, requires preparation—emotionally and financially. We’re going to look at three ways to prepare yourself, your business, and your team for successful growth while maximizing your ROI and freeing up your time and brain space.
Your business is your baby. But the truth of the matter is you won’t escape the daily overwhelm if you don’t build a team. One question I hear from a lot of clients who are ready to grow is “What if my team doesn’t do their tasks in the same way I always have?”
Spoiler alert: your new team members won’t do things in the same ways you do—and that’s a good thing.
By expanding your team, you open your business up to new, possibly better, ways of operating. We can’t know everything all the time. Making room for new people, new ideas, and new ways of completing tasks enriches your relationships and your operations.
To make the most of your new hires, you need to create systems and develop your own leadership skills. Establishing an infrastructure for growth can be challenging, but ultimately a very profitable one.
Just remember your team will make mistakes. They won’t get everything right the first time, but chances are neither did you.
Take a second to assess the lowest dollar tasks you are performing in your business. Chances are they are ALL administrative. For most business owners, hiring a virtual assistant or administrative assistant is a great first step toward building your team.
Start by identifying the back end or customer service tasks that must happen. In the past, I’ve delegated very routine marketing tasks to administrative assistants. Reaching out to potential clients on Facebook can be a time-consuming task. Either you spend time you don’t have halfway connecting with people because your attention is drawn elsewhere OR you can template your best conversation starters and tell your VA to go get ‘em!
By documenting and systematizing your tasks, you ensure the transition is as seamless as possible for your business—and your new employee. After identifying the tasks you’d like to delegate, create a quick video of yourself in action, and offer that as training to your new hire!
When you’re no longer consumed by the onslaught of administrative tasks, you are free to sell, generate additional revenue, or provide an additional service to your clients. The return on your “free” time is massive.
Your administrative assistant is in place, but how do you know when it’s time to bring on your next trainer, massage therapist, or esthetician? This decision completely depends on the business, but here is how to make sure you’re not caught with your financial pants down:
Using the Profit First model, create a new bank account, and start saving for your future team member. When you can allocate their salary to the account each week, it’s the right time.
By knowing their salary and banking that amount every month, you are creating the one-month salary buffer we recommend, but you are also getting an accurate view of how far you potentially have to go before you’re ready to financially commit to a new team member.
Once you can easily bank their salary month to month, you’re ready!
If you find yourself struggling to stash the money away that you need to grow your team, and increase your peace of mind, reach out to us. We would love to help you implement Profit First so it works for you.
When you’re feeling overwhelmed in your business, growing your team seems urgent—and sometimes it is! But the more you can prepare yourself and your finances before adding on a new team member, the better the ROI is for you, your business, and your new employees. When you make deliberate financial and training decisions, you create a team as loyal to your business as you are!