Our favorite time of year happens four times: at the end of each quarter. If you’re following Profit First, this is when you, as the business owner, get to take half of what’s built up in your profit account as a distribution (a bonus, if you will) to yourself.
That’s right, every 90 days you get to share in the profits of your business.
Three months can fly by—especially in your business. It’s that time again for your Quarterly Financial Routine. You do have a quarterly financial routine, right? If you do, awesome! If you don’t, you’re in luck. We’ve compiled our top three tasks that should be a part of every business’s quarterly review.
In addition to the quarterly tasks, we strongly recommend using your quarterly quiet time to review the progress of your yearly goals. Revisiting the goals you set back in January every three months allows you to stay on track, reflect on your priorities, and hold yourself accountable.
Now let’s take a look at the top three quarterly tasks we recommend in your business.
You know your business is making a profit, but do you have a clear understanding of your KPIs? Key performance indicators are built into the Profit First model. By creating a spreadsheet for profit distribution every quarter, you can more quickly and accurately track the performance of your key accounts and begin to compare any fluctuation quarter over quarter.
If your business is growing, take a close look at your distributions from each account, then consider any notes you have made in previous quarters and adjust your distributions accordingly. If you’re finding that your operations expenses have increased, determine why and whether you need to increase your allocations there. Ideally, you have a good handle on your expenses and can ultimately increase your owner’s pay and profits instead.
Spending time with your KPIs will help you develop a broader understanding of your business operations, which leads to a positive impact on your owner’s pay percentage.
The goal of Profit First is to make sure you are paying yourself what you need. A quarterly analysis is a crucial step towards ensuring you allocate the proper owner’s pay percentage based on any account fluctuation.
Take time at the beginning and end of each quarter to analyze and record any changes to the buffer in your owner’s pay account. The cushion in your account should be increasing over the quarter, meaning you’re allocating more to that account than you ultimately need. If you have a steady increase, it’s time to raise the amount you actually pay yourself.
However, if your revenue is down, you might be eating into your buffer. It’s natural to think the easiest solution is to adjust your owner’s pay allocation down—don’t do it! If you notice the drop mid-quarter, stay the course, trust the buffer, and look at your financial standing as a whole at the end of the quarter.
As I mentioned, Profit First’s goal is to make you money. If you are at your minimum lifestyle lock number, do not adjust down without referring to Task #3 or reaching out!
Whether you’re practicing Profit First or not, running a quarterly expense analysis report by vendor will tell you everything you need to know about who you’re paying, how much, and when.
This report offers a comprehensive reminder of every vendor you’ve paid throughout the quarter. This is the time to evaluate if you are still getting value from their services. Is there another vendor who does the same thing that you can go with instead? Or do you have the potential to eliminate an expense?
Doing this analysis can also bring to light duplicate charges, increased subscription prices, or subscriptions that you no longer use. Identifying these will help you to save money in the long-term.
Bonus tip: If you are thinking about decreasing your owner’s pay (like we talked about in Task #2), don’t do it! Decreasing expenses is the key to keeping your allocation intact.
By creating a regular quarterly analysis of your business, you empower yourself to make educated decisions based on experience and expertise. Without trust in the system, you might end up making impulsive financial decisions that end up hurting you or your business in the long term.
You don’t have to wait for a special day to analyze your financial health. Schedule a quarterly date with your spreadsheets and make the most out of your relationship. Getting up close and personal with your finances will help you feel more confident, prepared, and empowered to develop your business needs’ money mindset!
If you’ve ever logged into your business account to double-check your balance before making a purchase, you’re like the majority of business owners. And you’re also suffering from Parkinson’s Law.
Parkinson’s Law says that we use all the resources we have available to us. So if we have a week to finish a project, it’s going to take us a week to get it done. Even if the actual project only takes us two hours. We’ll put off work on it until we only have two hours to get it done.
If you’ve been in business for any amount of time, you know that there’s a lot to growing a sustainable business. Maybe a lot more than what you bargained for.
But without going back to get a business degree (because who has time for that!?), how do you gain the knowledge you need to be successful?
The 2022 calendar year is officially over, which means that tax season is upon us. (Happy New Year, right?) It’s time to start getting organized so you don’t have to ask for an extension on your taxes.
If you’ve been following along recently, you’ll know that there’s a lot you can do to prepare. We’ve told you how to reduce your taxes without reducing your net profits, we’ve shared how to work ahead so you can minimize your tax season stress, and we’ve given you tips to prepare for taxes well in advance.
There are a lot of different coaches out there. A sports coach, supporting athletic teams to bettering their game and winning championships. A personal coach, to guide you in creating a life you dream about. A business coach, to help you develop a strategy to keep your business growing.
Once your business is running and you’ve started bringing in regular revenue, have you considered the benefits of a profit coach?
No matter what time of year it is, you can make it your best year yet. For many small business owners in the health and wellness space, that means bringing in more clients, developing new programs, and increasing revenue.
Yes, revenue is important, but not at the expense of prioritizing the things that can make that happen. And what can make that happen is you, your network, and the systems you have in place to simplify your business and your life.
Have you set big, lofty financial goals for 2023? And if so, how did you come up with those numbers?
Setting financial goals is incredibly helpful so you have something to strive for, but setting the right goals is vital. If they’re not realistic, you’re bound to feel frustrated mid-year, throw up your hands and give up.
Let’s avoid that by setting your goals with intention and research. Answer each of these questions and write down any numbers and calculations so you have them handy.