Shannon Simmons
Author Archives: Shannon Simmons

How Profit First Can Help You Talk About Money

As a bookkeeper, I’m always taking the pulse of a business to help assess and improve its financial health—ultimately, so that the humans behind it can have all they want out of life. I talk about money a lot because it’s—no pun intended—the currency I deal in. But it never fails to surprise me how uncomfortable most people are to discuss money, be it their desire for it, their lack of it, or their fear of losing it. Why are we so afraid to talk about it honestly and openly?

Money itself isn’t good or bad. Money is just a thing we use to transfer energy back and forth between people. It’s a medium of exchange to get what we need to live—and then, hopefully, to experience our best lives.

It drives me crazy that money is such a taboo subject, but I get it. I see people ashamed that they’re not providing enough for their family, or that they’re in too much debt, or that they can’t afford what other people can afford. There’s also the hesitation to be proud of financial successes. You’re seen as bragging if you’re doing well.

The truth is, we usually don’t know the whole story behind everyone else’s finances, and we get everything out of whack when we set up comparisons. It’s not apples to apples, because the other guy may be dealing with oranges.

If you can talk about it, you can change it

One of the things I love about Profit First is that in encouraging us to pay ourselves first for our hard work, it essentially encourages us to believe that we deserve that money. It puts money at the forefront of the conversation of why we’re in business in the first place. Sure, you have a great service, product, or skill that you want to offer to the world, but let’s face it, you’re also here to make a profit.

Here’s my two cents on how to talk about money with the people closest to the backend of your business, with the goal of eliminating secrets, banishing anxiety, and making smart decisions that will help you to sustain and grow your business.

Talking about money with your bookkeeper

Your personal financial health and your business financial health are intertwined. Be honest with us about both. We can’t help you with your money if we don’t know what’s going on with your money. Are you in a jam with your finances at home? Are you not making a living wage? Maybe we can make a suggestion on the business end of things that will help to lead you out the hole you might be digging.

Bookkeepers are experts at reviewing your financial data, so we don’t give money advice without having facts to back it up. In other words, we got receipts. Even if your bookkeeper isn’t privy to your personal bank statements, it’ll likely all get fleshed out for her when she reviews your business statements and

And we all have our dirty little money secrets. The things we like to splurge on that no one else thinks worth a dime. Or the occasions we got ripped off and felt we should have known better. As bookkeepers, we’ve seen it all—maybe we’ve even been there ourselves—so nothing is too taboo to share. Tell us so we can help.

Talking about money with your team

What’s appropriate to share with your employees and contractors? This one may surprise you.

I’m a fan of having an open-book policy with your staff and sharing how things are going with your business. I share my P&L figures with my team on a regular basis—they know my allocation percentages. Employees are your boots on the ground. The more they know, the more likely they are to be invested in increasing revenue for your business. Their success is tied to your success, especially when you’re doling out bonuses based on your profits at the end of the year. Isn’t it great when your employees point out how you can eliminate an expense because they’re no longer needing the service you’ve been paying for?

Most business owners don’t want their team to know how much they’re making. But what I’ve seen is that most of the time, your team thinks you’re making more money than you actually are. Sharing your business finances with them can dispel the myth that you’re swimming in cash, and that it would be easy for them to leave and become your competitor—one of the biggest fears that business owners have.

I’ve started to gently encourage my team members to open up a bit about their personal finances, if I have their permission to do so. I can see that it affects their work when they’re struggling at home—we all have money anxiety at some point. If you have staff meetings, you’re probably already providing some kind of business education to them on a regular basis, so consider adding financial literacy webinars and other tools and learning to the mix.

Talking about money with your business partner

Profit First is beautiful for business partnerships because it puts percentages in place from the starting block that both (or all) partners agree to ahead of time. Sure, there will be issues from time to time, but they’re much easier to mitigate when you’re working from an established framework.

It’s also important to know your money personality. Is one of you a spender and the other a hoarder? For example, you could have differing views on what constitutes a necessary operating expense, but at least with Profit First in place, you share a basic understanding of how money will be handled in the business.

Talking about money with your life partner

It’s common for business owners to discuss major decisions about their business (such as big-ticket purchases) with their life partner, even if that partner doesn’t have a legal interest in the business. They’re vested in its success because they’re vested in you.

We advocate for some regular conversation about your business with your life partner. I know a couple that talks about it every Sunday morning, but if that’s too much taboo for you (!), I recommend doing it at least quarterly. Make them privy to the details of your Profit First strategy. I often see conflict where the partner doesn’t understand the difference between your revenue and your profits. You can show them your Profit First allocations to help them understand that you have a plan in place for when and how often money will be flowing out of the business and into your pockets—and how you’re avoiding the need to invest future household income into the business, because you’re saving in advance for things like taxes.

It gets easier

Take it from a bookkeeper—the more you talk about money, the easier it gets. Don’t let a lack of practice hold you back from making progress. Practice!

Customize Your Profit First System with Advanced Accounts

The Profit First system is simple enough that most people can see the immediate rewards of paying yourself first. But no two businesses are alike, and each will have its own complexity. We love that it’s so easy to customize the system to meet the needs of your unique business, by opening additional, “advanced” accounts.

Every business following Profit First sets up the five foundational bank accounts—the buckets, if you will—to distribute income. Then you make your fixed allocation percentages twice a month without deviation. But you’re the owner and you know your business best. After a while, you might notice that something in your system needs tweaking.

Maybe you didn’t foresee having to pay a large invoice that ended up draining your OPEX bucket. Now you’re aware that it’ll be an annual expense for your business—same time, next year—and you want to plan ahead. For example, CrossFit gyms have an annual affiliate fee of $3000, and sometimes owners forget about that until it’s right on top of them.

Take some pressure off yourself. If it will help you to create a new bucket, or account, to meet a specific expense, we encourage it. In fact, there’s a saying that gets kicked around amongst Profit First professionals…

When in doubt, create an account.

By the way, we’re calling these “advanced accounts,” because this is technically an advanced Profit First technique. (That’s right, young Jedi, you’re advancing.) But really, it’s quite simple. These are just extra accounts (or separate accounts, new accounts, sub accounts—whatever you want to call them) beyond the foundational five. Name your accounts in whatever way makes sense to you.

There are lots of reasons why you might want to open up an advanced account and flow some cash into it on a scheduled basis.

A payroll account is an advanced account that we think every business owner should have (unless you’re a solo operation). This ensures that you protect employee and contractor wages so you don’t accidentally run out of money to pay them.

Or, let’s say you know you’ll need to make a big purchase down the road, such as new exercise equipment for your gym. You could open an equipment account and start accumulating those funds now (rather than potentially facing the sudden expense when a machine breaks down).

Or maybe you want to invest in continuing education courses for your staff. If it’s important enough to be a goal, create an account for professional development and start saving for it.

Maybe you want to embark on a marketing push for your business, which will involve hiring multiple vendors. Having a separate marketing account might encourage you to determine a budget in advance and stay true to it, without comingling those expenses with all the other things in OPEX.

Creating more accounts ensures that money is there when you need it to be. It’s really all about preparation and peace of mind.

How to put money in advanced accounts

So you’ve determined you need to create some extra accounts. How are you going to make this work within your Profit First system? Where will the money come from?

Like the examples we’ve been talking about here, most of the advanced accounts that our clients set up are to isolate and cover specific business expenses. In the absence of a new account, you’d be paying these bills out of OPEX. So you’re almost always looking at reallocating money from OPEX when you create an advanced account.

Your allocation target is quite simply how much money you want to invest into the thing you’re creating the account for, and in how much time you want to achieve it. That affiliate fee is $3000 per year? Divide it by 12, and figure out the percentage of your income that equates to. (You want to accumulate $10,000 in an equipment account in 8 months time? Divide $10,000 by 8 and figure out the percentage of your income that equates to.)

You’ll then subtract that percentage from your current OPEX allocation percentage. Your OPEX funds aren’t really being reduced per se, they’re just being redistributed into new accounts so you can very clearly target money toward specific expenses.

Advanced accounts can come and go

You don’t have to use them all the time.

For example, when I’m thinking about growing our team, I start transferring money into my new hire account. I won’t actually bring them on board until I’ve got at least one month of their salary in there (and provided I was able to comfortably accumulate that pay within one month’s time. Check out our important guidance on this in How to Profit First Your Way to Team Growth.) Once I’ve actually hired them, I’ll transfer the funds to the payroll account, and let the new hire account remain dormant for a while—until I’m thinking about hiring again.Occasionally there are times when the creation of an extra account won’t be for an expense, or when it might make more sense to assign dollar amount allocations rather than percentages. Let us help you navigate these trickier cases.

How to Profit First Your Way to Team Growth

Bringing on new employees is an exciting part of business growth. But if you haven’t done it before, or even if you have, it may be daunting to think about taking on the added responsibility. Can you afford the expense of a new hire? How do you navigate the administrative aspect of paying them? Maybe you’re only paying yourself thus far, and that’s simple enough—you just transfer fixed percentage allocations into your Profit and Owners accounts twice a month. That all changes when you have a team.

As you know, the Profit First system involves setting up five separate bank accounts for the distribution of funds. But there are smart reasons to create additional accounts, or subaccounts, to earmark and protect funds that need to be reserved for a certain purpose. Paying employees might be one of those reasons. 

Split Payroll from OPEX?

That is why we often suggest that if you have any employees besides you as the owner, you should create a separate payroll account, as a subaccount of OPEX. 

Why do you need a separate payroll account? Why can’t you just take from OPEX to pay your employees? Two big reasons. 

A separate account makes sure the money you’ve allocated for employee wages can’t accidentally get intertwined with all your other expenses, and then accidentally spent. For example, if your rent and your payroll are both paid out of OPEX and one of these expenses would happen to place you in overdraft this month, the bank will decide what to pay. The bank might choose your rent over your payroll. They’re both important, but which is easier to rectify?

Having separate accounts ensures that your team members get paid no matter what. Bouncing a payroll check is really the absolute worst for employee morale. 

Having the payroll account split from OPEX also ensures that you meet your obligation to set aside the taxes you owe to the federal government on behalf of your employees as soon as you pay their wages. These funds can’t get accidentally spent either. This is another big one. You don’t want to get in trouble with the IRS for failure to pay your payroll taxes.

A payroll service can help you calculate your employee wages and payroll taxes. Check out a few services here. We recommend OnPay and you can check them out at our affiliate link here.

And don’t let us scare you too much. Read our blog post on some common payroll mistakes and how to avoid them.

Can You Afford to Hire Help?

Theoretically, a new hire should help to generate revenue in some way, or free up the owner to do so, but in reality things can take a while to get off the ground—or things might not go according to plan. You need to onboard the new employee, which takes time. Time where they may be costing you time and money. 

And according to Profit First principles, hiring an employee is a business expense that you must be able to meet without increasing your current total OPEX allocation. This means, for example, that if your current OPEX target allocation percentage is 50%, and your payroll subaccount target is determined to be 25%, then your OPEX becomes 25%.

So how do you determine what percentage to allocate toward the payroll subaccount?

If you’ve already got employees on the books, take a look at last year’s figures to see what you paid for employees in total. Determine what percent of your revenue that figure was, and use it as a basis for your payroll target allocation percentage.

If you’re considering your first hire, you will want to have one month’s worth of employee salary as a buffer in your payroll account before you bring them on board. Determine what that figure is, and then try to transfer 2-3% from OPEX into the payroll account each month until you’ve reached that figure. 

The length of this process will enlighten you as to whether hiring someone now is feasible. Did it take just a month or two to accumulate that one-month salary buffer? Then you can probably afford to add that employee. On the other hand, did you struggle to make available 2% from OPEX each month to transfer to the payroll account? If that’s the case, you need to rethink your decision.

Independent Contractors… on Payroll?

Your business might depend on independent contractors, rather than employees. In terms of cash flow management, we recommend that you compensate them from your payroll banking account if they are providing your clients substantially the same service that is provided by your business as a whole (for example, personal trainers who are contractors at a fitness studio). If, however, the independent contractor is providing a service FOR your business, such as janitorial or marketing services, you should include this expense as part of OPEX.Here’s more on leveraging team members in your wellness business.

When and How to Reassess Your Profit First Distributions

So you’ve implemented Profit First in your business and are on your way to establishing smarter expense spending habits, financial security, and peace of mind. You’ve determined the target allocation percentages for your five bank accounts—and you’re maintaining the discipline to distribute your revenue into those accounts consistently according to those percentages. What’s next? Should you sit back and relax?

Not exactly! The Profit First method is designed to help you not only become immediately profitable, but to set you up for continued success in the long term. The goal is to have distributions that are not only achievable and adequately meeting the needs of your business and personal priorities today, but that are also optimal for business growth, efficiency, and sustained profitability going forward. Making sure that you’re dividing your revenue into the optimal percentages, in turn, enables your business to be fully optimized and, ideally, one step closer to an optimized quality of life.

You see, your target allocations can and should evolve over time depending on your revenue and your needs. The Profit First assessment graph serves as the fundamental guidance for how to allocate funds based on revenue range, and it’s largely appropriate for most businesses, but your specific business and your priorities will dictate if, when, and how your percentages will fluctuate.

When to Reassess

You should review your target percentages every quarter. Quarterly reassessment allows you a few months to see if your current allocation percentages are working fully in your favor, and if not, where you can make improvements.

(Actually, a quarterly review makes sense in every area of your business, but it’s particularly important for your finances, and we have some ideas here on where to start.)

How to Reassess

There are a couple of ways you can do this.

You could start the assessment process from scratch and determine target percentages based on your revenue range using the Profit First assessment graph. But what if you haven’t yet made the leap into the next revenue range? It may look as if no changes are necessary to your strategy, but you probably know better. You’ve come so far already, and you likely have a clearer picture of your desired and attainable goals.

When your revenue changes, it’s definitely a good time to reevaluate your target percentages, but you might need a professional to help you make sense of the numbers and set new quarterly goals. We can help with this.

Look at OPEX

For starters, you can look at your OPEX account for guidance. Are you accumulating more money in your OPEX account than you’re actually needing to spend? If so, you know you can safely reduce the distribution.

Let’s say you’ve got a $5000 surplus sitting in OPEX that’s built up over the last quarter. You can figure out what percentage led to the accumulation of that surplus, and you can safely reduce the OPEX distribution, in increments of 2% to 3% per month.

This would be the time to consider how you could better make use of those funds by reallocating them to another account or by creating a special account for another use that also falls under OPEX, like a payroll account.

Let’s say your OPEX is at the target allocation of 50% and you want to take some continuing education classes which will improve the services you provide in your business. You know you’ve got some wiggle room in OPEX (that $5000 cash surplus as proof) so you decide to create a separate account for, say, Personal Development and mark its target allocation percentage at 5%. You then reduce your OPEX target to 45%. Soon enough you’ll have the funds for that class, while still being able to cover your other business expenses.

Or you could create a separate account for large annual expenses or emergency maintenance. It really all depends on what you need.

Owner’s Pay

Having too much revenue to distribute is a nice problem to have, but what if your revenue is down? Should you cut your own pay to compensate? We don’t ever recommend reducing your Owner’s Pay percentage when revenue is down, though it may seem like an easy solution. Check out this blog post for guidance on determining your Owner’s Pay percentage according to Profit First principles (hint: you’d only ever reduce it when revenue is UP).

When to Talk to Your Accountant

Any time you have a big change in revenue—certainly if your business moves into another revenue range on the Profit First assessment chart—it’s wise to talk to your tax professional. That’s because beyond any changes you make to your cash management system, there may be changes to your tax liabilities. A good accountant will recommend ways to reduce your tax burden, such as investments or deductions, that are specific to your overall finances and priorities.

And come September (aka the financial third quarter), you should ask your accountant to estimate your tax rate for the current year. You’ll have eight months worth of real revenue data, so there’s no need to make a guess based on last year’s figures. However, if you’re following Profit First principles, you should have enough funds in your Tax Account based on the performance of your business to pay your taxes. But your accountant can and should work with you to reduce that tax liability as much as possible. (If not, get a new accountant!)

How to Remove the Temptation to Spend Your Revenue

You’re tired of not having a handle on your money. As an entrepreneur, you know all too well the consequences of poor money management—on you and your business. So you took a leap and set up Profit First, which is a step in the right direction. But you’re still overspending. You still have your hands in the proverbial cookie jar, and it’s time to stop.

But how do you remove the temptation of spending your revenue, in particular your growing profit and tax account? They look so tempting and full of money, but their whole purpose is to accumulate money. So let them do their job. Set up smaller plates, and limit your spending to your operating expense account. 

Are you not completely sold yet? Then, let’s take a look at some other ways to remove the temptation of spending your sweet, sweet revenue early and (possibly) on the wrong things.

Okay, but I want to take a class.

That’s great! You’re a person who cares about personal and professional development. You’re constantly investing in yourself because you love to learn and know that the more you learn, the stronger your business will become. 

You don’t have to sacrifice that important part of yourself because you use Profit First, but you need to plan for it. If you know you want to incorporate personal development into your business, set up an additional account for it. 

Once you have all of your other accounts on target, start your personal development account. You don’t have to save much, but as you continue to put a small percentage away, you’ll be ready when you’re ready to pull the trigger on that course you’ve been eyeing—and you didn’t have to compromise your other accounts to participate. Score!

Okay, but it just looks like SO much money is just sitting there.

Well stocked profit and tax accounts can look pretty tempting. They are the glistening oasis when you’ve been walking the financial desert for weeks on end. Andrew Jackson and Benjamin Franklin are waving at you as they sip frozen cocktails by the pool, and there you are, begging for water, dragging yourself through the hot sand. But I have four words for you: Snap. Out. Of. It.

Those accounts aren’t just sitting there trying to tempt you. They serve a purpose. A very important purpose that you know you need. If the temptation is too great to ignore, try moving your profit account and your tax account into different banks. Restrict your access and temptation. Trick yourself into honoring your desire and need for financial security if that’s what it takes.

Okay, but I’m not sure I can do it alone.

If you’re having a hard time holding yourself accountable, that’s okay. But did you know it takes more than two months to create a new habit? And not to mention the new behavior patterns needed to overcome decades of money mindset habits.

But old habits or impulsive spending don’t mean that your Profit First journey is a total loss. Find an accountability partner. If you are struggling to create accountability within yourself, find a friend or biz bestie who you can call with you are a step away from clearing your account and heading to the sale on the gym equipment. 

Make sure your accountability partner understands your financial goals. In addition, this person should be supportive of the place you’re in emotionally and the challenges you’re facing. 

Creating new behavior patterns is challenging, even on a good day, so be compassionate with yourself. If you are struggling to keep your financial promises to yourself, think of new ways to make it really inconvenient for you to access your accounts. Maybe you don’t sign up for online banking or have an obnoxious password you hate typing in.

The important part is to keep your commitments to yourself and realize you committed to spending out of certain accounts when you set up Profit First, so you need to keep it that way. Future you will thank you for it.

How to Pay Off Debt in Profit First

Debt feels suffocating. Your financial walls are closing in on you, and you’re ready to get rid of your personal or business debt once and for all. But how exactly? We can and will help you with this. But before we get into our recommendations for conquering debt, we need to lay some ground rules. 

What does Profit First say?

First things first, you cannot pay off debt unless you are profitable. So how do you get profitable? By setting up Profit First, of course. Before you create your plan to pay off debt, you need to make sure all your Profit First pieces are in order. This way, your business will continue to run smoothly while you achieve your financial goals.

What pieces do you need? Take our Profit First Assessment and get a list of what accounts to set up!

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Getting started with your debt

Step one to taking control of your finances is to control spending. By running and analyzing an expense report, you will fully acquaint yourself with every financial transaction in your business. You’ll gain a deeper understanding of where the money in your business is going and how you can control your spending.

The next step to paying off debt with Profit First is to understand the intention behind your accounts and allow yourself some grace. This is true whether your debt is in your business or personal finances.

The minimum payment of your credit cards, loan payments, or whatever type of debt you find yourself in comes from your operating expenses. Your bill is covered at its minimum each month. Any additional payments to the principal come from quarterly profit distribution. 

Here comes the “grace” part. Just because you are laser-focused on paying off your debt, don’t forget to take some of your quarterly profit and have a little fun. You work hard. By allowing yourself some wiggle room to have fun once in a while, you’ll stave off burnout, so you’ll stay strong for the long haul.

Now that you have the Profit First debt-busting basics down let’s look at a couple more “must-dos” when managing your money.

Why would I save to a savings account if I’m trying to pay off debt?


Let’s get real for a second. Debt comes from spending too much before you have it. So make sure you don’t make a similar mistake by aggressively paying your debt down before you have other financial safeguards in place, i.e., an emergency savings account.

For many clients, the tendency is to put all of their profit toward debt as quickly as possible. We like where your head’s at, but what’s the point of paying off your debt if you are one big emergency away from creating more? 

What happens when you’ve paid off all your debt (without emergency savings in place) and your HVAC breaks? You’re right back where you started, except this time, you’re more frustrated and in debt than you were previously. 

Creating an emergency savings plan does prolong your journey to becoming debt-free, but it’s the only way to ensure you stay that way once you get there. Unfortunately, emergencies do happen—and usually when you least expect them.

What can you do in the meantime?

Your small plates are in place, you’re paying minimum payments from operating expenses, and you’re building your emergency savings account. Here are four debt management basics you can implement while you’re saving. (These aren’t Profit First principles, just good old-fashioned best practices.)

  1. Call your lenders. Ask if there is the option to refinance credit card debt to lower your payments or ask about the possibility of getting a better interest rate. There is no harm in asking.
  2. Transfer balances. In the short term, you will have transfer fees, but in the long term, you’ll save because you’ll lower your interest rate.
  3. Explore the possibility of your business getting a bank loan to pay off credit card balances or other debt.
  4. This is the big one: You need to have the discipline not to use your credit cards again. You are doing all this work. Don’t let yourself end up in the same position in the future.

Managing debt is a beast. But the struggle toward financial freedom is underway. You’ve set up Profit First and created emergency savings. Now all that’s left to do is stop blaming yourself for being in your current financial position. 

No matter how much you might hate your debt, realize that it gave you experiences that have brought you to where you are today. Your debt afforded you opportunities, but now that you are making a profit, you don’t need it anymore. So leverage the income you have, say thank you to debt, and show it the door.

How to “Fix” Your Sales Challenges: Fix This Next Series

The best way to identify your Next Vital Need (what to fix next) is to take the assessment. And if the assessment tells you that you need to fix your sales, read on!

Unpredictable sales are frustrating, especially when that rollercoaster cycle leads to unpredictable profits. After all, operations expenses are usually relatively stable. So when you’re not bringing in enough revenue to cover expenses (after your profit and owner’s pay allocations, of course), you blame sales.

That’s a fair assumption. But there’s more to establishing predictable sales than simply making sales month over month.

If you feel like you’re experiencing a challenge with your sales or you’re finding that you just don’t seem to have much left in your OPEX account each month, it’s time to “fix” that sales challenge.

But again, it’s not about making more sales. It’s about making the right sales from the right people so that you can live the lifestyle you want.

Do You Know Your Lifestyle?

Being able to support yourself and your family is important, right? We’re all for paying yourself a living wage, but do you know what that looks like for you? It looks different for everyone depending on where you live and what lifestyle you want to maintain. Figure out how much you need to live comfortably while also eliminating debt and putting some cash away for savings. Then reverse engineer the numbers to determine what you’ll need in sales to make that happen. Consistently.

Of course, more sales isn’t necessarily the answer if you’re not selling enough to take home what you want. There are a lot of factors to consider here, including reducing expenses. And when you’re looking at your numbers on a regular basis, you can easily calculate exactly how much you need to make in sales in order to fund your owner’s pay account appropriately.

Are You Attracting the Right People?

You’ve likely heard of the ideal client and the importance of knowing who that is. Once you know who that person is, are you doing the things you need to do, in the right places, to get them interested in your services?

It’s not enough to advertise or create content for your audience. You need to show up in the places where your ideal clients show up so you can provide value and grab their attention. That means being an active participant, like guesting on podcasts your people listen to or commenting on social media content, responding to your subscribers’ emails, etc. And not just half-hazardly either, but with intention and in the places where you know your “right people” are hanging out. You don’t need just anyone to join your gym or visit your studio; you need the right people to do that.

Are You Converting Those Prospects?

Once you attract the right people, you need to convert them into customers–and repeat customers if that’s your business model. It’s not about making the sale at any expense; it’s about selling with integrity to the right customers.

It’s not your responsibility to be the hero of your customers’ challenges; it’s your job to make them the hero and guide them along the way. This allows you to focus on the potential customer, not on making the sale–thereby eliminating the pressure on you or your salesperson to make the sale. After all, you may not be the best solution for everyone. And wouldn’t you rather convert the people for whom you are the best solution?

Do You Deliver on Your Commitments?

No one likes to feel let down, and sometimes clients aren’t happy–but they won’t tell you that. There are a lot of reasons why you may not deliver on the promises you gave during the sales process, not the least of which being overextending yourself (which we often do in an effort to make more sales).

Depending on your business model, the goal should be to delight your customers so they’ll continue buying from you. If they’re not happy they will likely take their business elsewhere. But the reality is that it’s much easier to retain a customer you already have than it is to find a new customer.

Are Your Clients Delivering?

A sale isn’t really final until both sides have delivered on their promises, and sometimes a sale remains incomplete indefinitely. This includes the client paying in full for the delivered product or service. You’re a business, not a charity, and clients need to fulfill their obligations to you.

If your business is a retainer model, you’ll notice that some clients will pay later and later as time goes on if they’re not on an auto-pay system. And if you don’t have a delinquent collection system in place, you’ll want to get something set up.

Looking at your own business from a different perspective can be difficult. If you’re struggling to determine where your sales breakdown is, let’s talk! We have experience helping clients like you get on the right sales path so they can live the lifestyle they want. Contact us today!

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

Summer is getting closer. Days are longer. The sun is shining, and people are out!
With the pandemic (hopefully) in its last legs and the increased availability of vaccinated friends and family to hang out with, your business might once again be susceptible to the dreaded summer slow-down.

Granted 2020 threw any “normal” business pattern out the window. Still, if owning a business through a pandemic taught us anything at all, it’s to always be prepared—even for the unexpected. Of course, maintaining a solid paycheck is important, even when your revenue is on a roller coaster.

By prepping your business today for the future, you’ll be ready for next summer and all the summer slowdowns after that!

Utilize your time

While an influx of free time in your business is a nice change of pace, it can also come with the anxiety-inducing stress of being uncertain of when and if the business will come back.

The best way to combat any down-time anxiety is to get busy. Having a slow season is a perfect time to get those project ideas off of the shelf and put some work into developing your business instead of always working in your business.

Utilize the time you have to create new revenue models—which leads me to my next point.

Adjust your revenue models

The most failsafe way to ensure you never have a summer slow down is by creating a monthly recurring revenue model. When your clients take a week or two off to vacation with their families, you still get paid.

But how do you incentivize your clients to pay even if they aren’t using your services? You might be thinking of a discount, and you’re right. But we are NOT talking about discounting your services.

There are many ways to entice your clients to capitalize on a pre-pay model: retail discounts, faster response time, exclusive access, add-on bonuses. The list goes on.

We have worked with massage therapists who offer a regular monthly massage to their pre-paid clients. If they don’t use their massage that month, they can have two the next month. This type of model was HUGELY helpful during the pandemic—clients were racking up unused credits, and business owners could count on the monthly revenue.

You know your business better than anyone else, so get creative. The important part is to create a way to have an income you can count on even when the lean times take hold.

Create a summer account

You’re still coming up with the perfect monthly recurring offering for your business, but that doesn’t mean you can’t proactively prepare for slower summer months.

Many dance studios will run camps, or gyms can run summer workout initiatives. Those are great ways to keep income flowing. If you find yourself without monthly recurring offerings or the ability to run camps, the next best way to help over the summer is to set up a summer savings account.

Figure out the bare necessities you and your business need to get through the summer. You know you’ll need rent, AC, insurance, admin payroll, etc., so after totaling your amount needed for necessities, divide that number by nine and allocate it into your summer account the other nine months of the year.

By creating an extra summer account, you know your basics are covered. Any additional revenue that comes in is “extra” and will cover payroll. If you have a camp over the summer, your basic needs are covered, and teacher payroll will be covered by camp revenue.

It’s hard to enjoy time off with your family if you’re constantly worried about how rent is getting paid. Ensuring your operating expenses and owner’s pay are accounted for no matter what the season brings, you create a more substantial, more sustainable business for you and your clients.

If this all seems overwhelming, reach out. We’re happy to help.

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