Three Tasks to Include in Your Quarterly Financial Routine

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.

Task #1: Profit distribution analysis

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.

Task #2: Owners pay adjustments

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!

Task #3: Expense analysis report

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!

Mindset of Paying Yourself a Living Wage

You are committed to the success of your business. Your business’s health and wellness allow you to live a full life, make your mark on the world, and help support the lives of your clients and team. You spend so much time taking care of the things and people who keep your business running, you forgot to financially support one of the most critical pieces of the puzzle—you!

The reality is that paying yourself a living wage is about MUCH more than dollars and cents. Creating a living wage for yourself (and paying it) reflects how you feel about yourself as an individual and business owner. Becoming aware of your money mindset and how it holds you and your business back is a crucial step towards your financial health, success, and freedom.

But do you know how to determine the right living wage for you? It’s important to examine why you’re waiting to pay yourself the big bucks and how to assess where you are now to create a brighter future.

What is a living wage, anyway?

The first step to finding out how much money you need to make a living is to know what a living wage actually is. We’re not talking Ramen noodle living; we’re talking about normal everyday living. Spend some time thinking about what living really means to you and how much you need to finance it.

Ultimately, your pay is about more than numbers and spreadsheets. Mindset shifts around determining your owner’s pay can bring up feelings of guilt and even unworthiness. Depersonalizing your salary is a great way to sidestep any residual emotional issues around money. Determine what you feel is a fair wage for someone else, and pay yourself at least that much—minimum!

Do you want to work in your business for the rest of your life? If you are like most business owners, the answer is probably no. But if you’re not paying yourself a livable wage to do your job, how will you ever be able to hire someone to replace you in the future?

You can’t.

Check out our blog to learn more about how to determine your Profit First owner’s pay allocation.

Why should you pay yourself?

As a mature business owner, you might be waiting to pay yourself until you can sell your business for the perfect ROI. The truth is many entrepreneurs who have waited for the pot of gold at the end of the rainbow never see their payoff.

Living for what might happen in the future compromises your quality of life in the present. Putting Profit First in your business today helps you gain more financial clarity to help you reach future goals.

Fast forward to when you have your Profit First strategy in place. Your business fully supports your desired lifestyle, but you have “extra” money. Your first instinct might be to leave the surplus (the profit) in the business, but the best option is to pass the extra into your personal rainy day fund.

Transferring half of your business profits to your personal accounts on a quarterly basis and essentially paying yourself creates benefits to the owner. Moving your money out of the business and into your personal account creates a buffer if your business gets sued.

Additionally, the act of transferring your money into a personal account has the potential to make you more money in the future if you do decide to sell. On paper, a large portion of the financial value of your business is determined by the amount you have paid to yourself as the business owner. Typically, sellers can determine the sellable value of their companies by doubling or tripling the amount of income they received as the business owner.

By implementing Profit First and adjusting your money mindset in the short term, you are increasing the value of your business in the long term—and improving your quality of life!

If you’re ready to implement Profit First but aren’t sure where to start, reach out.

We’re happy to help.

Prepping Your Wellness Business for the Summer Slow-Down

Do You Fix This Next (or That) in Your Biz?

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:

1. Sales – You need to create cash to call what you do a business.
2. Profit – Making more than you’re spending creates stability.
3. Order – An efficient business runs more smoothly.
4. Impact – Make a difference in the world.
5. Legacy – Create permanence with your business and your ideas.

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.

Identify

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.

Pinpoint

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.

Fulfill

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.

Repeat

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.

How to Leverage Team Members in Your Wellness Business

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. 

Releasing control

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. 

Hiring your first employee

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. 

Preparing for additional team members

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! 

Seven Questions to Ask When You’re Hiring a Bookkeeper

Do you need help managing your growing business? Or are you just tired of staring at QuickBooks? Regardless of your motivation, finding a bookkeeper is a significant first step toward freeing up your time and streamlining your financials.

But finding the perfect bookkeeper for your business? Easier said than done.

With your business’s financial health relying on your decision, we’ve gathered what we think are seven of the most important questions for you to ask when hiring a bookkeeper. Asking the right questions up front can be the difference between going the right direction or veering your business off course.

Here are seven questions that will help you decide if a bookkeeper is right for you:

What should I expect regarding the project scope?

Chances are you know exactly what you need your new bookkeeper to help with, but most bookkeepers offer a wide variety of services. Even though in your mind what you need might go without saying, it’s vital to talk through your needs before agreeing to work with each other.

Creating clarity around business needs and setting clear expectations will ensure a smooth-running partnership.

You might want your bookkeeper to send 1099’s to your contractors or take care of your allocations, but without a comprehensive (and agreed upon) scope upfront, you might be asking for something that your new bookkeeper is not prepared to give. At the same time, you may need something that you hadn’t considered yet!

How many other businesses do you serve in my industry or at my income level?

Will your new bookkeeper understand the specific needs of your business or industry?

Regardless of previous work history, ask if they have experience with businesses similar to yours. Asking about who they have kept books for in the past allows you to ensure that they have an understanding of your unique business needs—and enables you to anticipate potential obstacles in your work relationship.
Finding out more about their background will help create a more seamless experience for you and them.

What are your professional qualifications?

The right bookkeeper for your business doesn’t necessarily mean they have to have an MBA in Accounting, but they need to have training and awareness of accounting principles.

The reality is there are no certifications necessary to become a bookkeeper, which is why asking about professional credentials and qualifications is so important! Don’t assume the depth of experience. Just ask.

Of course, we believe so strongly in using Profit First bookkeeping principles that we’re Advanced Certified Profit First Professionals. If you want to use Profit First, we recommend finding a certified pro!

How do you communicate with clients?

You’re busy. That’s one of the reasons you need a bookkeeper. The last thing you want is to hire a bookkeeper who will monopolize your time with ineffective (or excessive) communication that frustrates you and pulls attention away from growing your business.

Ask your bookkeeper-to-be how they typically communicate with their clients and why they have decided that is the most effective communication form.

You are looking for a candidate who is effective while being concise and respectful of your time and communication preferences.

How will you keep my account information secure?

This is a big one! You are sharing sensitive information with your bookkeeper. You need to know they have a plan for your safety. For our clients, we use a secure portal called SmartVault to transmit information.

Your information’s safety is critically important to us, and any bookkeeper worth their salt will feel the same.

Will I be billed based on hours?

Bookkeepers may charge on an hourly basis or at a fixed retainer rate. We prefer to work from a fixed rate for a few reasons.

We want you to be in control of your finances. Part of working from a fixed rate ensures that there are no surprises on your end. You know what’s coming, and you can prepare accordingly.

If you have a unique project you’d like addressed, we will scope the project ahead of time and adjust our rate from there. We want to help you create financial stability in your business in every way.

Will you have access to our bank accounts?

Different bookkeepers work differently. At Fit For Profit, we don’t perform any financial transactions on your behalf because we don’t ever want there to be a question in your mind about any transactions.

Some bookkeepers feel differently and will perform your allocations for you. We feel that this takes ownership of your numbers away from you—which is the opposite of how Profit First should feel.

Fit For Profit is all about making your finances work for you. We use a third-party app to retrieve your statements for us and we do everything we can to make it easy on you.

The right bookkeeper should be passionate, knowledgeable, and aligned with your needs and vision. Take the time to ask questions and explore before deciding on who will be best for your business. We know you’re busy, but finding your dream bookkeeper will take a little time.

If you have any questions or are still feeling unsure, give us a call. We’re always happy to help.

How to Determine Your Owner’s Pay Percentage

You did it. You put profit first in your business. You’ve been able to pay yourself and successfully grow your business. Your sales are increasing, but so are your expenses. But how do you know when the time is right to adjust your owner’s pay percentage?

The Profit First model puts you first. As your needs change—it’s time to adjust, not reinvent the wheel.

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Why Profit First Works…Really

If you’re like most people, you have a healthy dose of procrastination in you. You have a project you need to finish, maybe something you don’t want to do, and you put off getting it done until the very last minute.

Let’s say it’s your taxes. Maybe you’re not as organized with your paperwork as you need to be and you’re putting off digging for receipts and 1099s. You know you need to get this to your accountant by April 1 if you’re going to avoid filing an extension. So in the wee hours of March 31, you’re frantically searching your files–both physical and digital–to gather what you need.

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Using Profit First in Your Personal Expenses

You know that Profit First works in your business bookkeeping. Pulling out your profit and owner’s pay from the start has helped ensure that you’re actually getting paid each month. (And thank goodness for that!)

But even though you’re pulling a regular paycheck, your personal finances are still a hot mess.

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When Your Accountant Doesn’t Use Profit First

Accountants can sometimes get hung up on the principles of Profit First. They balk at the idea of taking profit first because they operate under the antiquated system of set a budget and stick with it.

Sure, it’s important to have a budget, but it doesn’t need to look like what accountants learned in accounting school. (Trust me, I know. I’m a trained accountant and Profit First bookkeeper.)

Here’s the thing though: Your accountant doesn’t actually have to be on board with you using Profit First. Because your accountant doesn’t actually balance your books for you and they aren’t creating your profit and loss statement or balance sheet–that’s your bookkeeper’s job.

Sometimes one person fills both these roles, but that’s not always ideal. (Though that’s a story for another blog post.)

Your accountant, on the other hand, is preparing your taxes based on what your bookkeeper provides. It shouldn’t matter to the accountant how you get there.

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