Take Action With Quarterly Profit Distributions
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.
How a Profit Coach Can Change Your Business
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?
How to Use Your Money for Good
Most business owners start their business because they’re seeking out a kind of freedom, either time or financial or even the autonomy to be able to do business the way they want. I admit that all of these things make sense to me and I’m on board with them all.
As the business grows and CEOs start to see the financial freedom they want, it’s common to feel a nudge to give back and use your money to do some good. Business is easier for some, allowing growth because of connections or privileges not everyone enjoys. Or maybe you struggled and you want to help others who may come from a situation similar to yours.
How to Make Your Gym More Profitable
Do you know how profitable your gym is? To be clear, the profitability of your gym isn’t the revenue you’re bringing in or even your net income, after expenses.
One of the biggest mistakes we see business owners make is over-simplifying the profit in their business. It doesn’t have to be a complicated process, but it does take a little bit of thought.
And to actually see real profit month over month and year over year? That takes a plan.
How to Keep More Money in Your Business
Do you ever wonder where all your revenue goes each month? You’re not alone. If you run out of money, your business will go under and be among the 85% of businesses that fail in the first five years.
It’s not a lack of revenue that’s the issue, which is helpful because more revenue always seems to be a challenge.
Nope, the key to business success is putting up guardrails and sticking to them.
When Your Profit Distribution “Isn’t Enough”
One of the best things about using the Profit First system is profit distribution time. Being the owner of the company, you get to take a profit once a quarter and use it as you wish.
But sometimes, we hear from clients that they’re not making enough profit, or that they want (or need) to be able to take more in profits every quarter.
Essentially, the owner’s profit distribution “isn’t enough.”
Managing Quarterly Profits and Taxes
If you’re a Profit First business, you get to take profit distributions four times a year. It’s exciting to see the fruits of your efforts and be able to boost your income as the business owner.
It’s honestly the best thing about Profit First, that you’re not limited by your owner’s pay (though it is important to pay yourself a living wage!). You get quarterly “bonuses” that you can spend as you wish.
You might ask, why not pay yourself more each week or month and enjoy the extra income in the moment…so you don’t have to wait until the end of the quarter? Because your profit distribution is not part of your salary. Even though it might look that way on your taxes.
Good Uses vs. Bad Uses of Debt: Knowing the Difference
At some point or another, most of us have had a relationship with debt. That first credit card we got in college or the mortgage to buy our current home. Sometimes the debt is used for good; other times the debt wasn’t in our best interest. (Maybe some of those early credit card purchases weren’t the best idea.)
I don’t want to sound polarizing, but there’s a good time and a bad time to use debt. That’s true in your personal finances and in your business.
So how do you know when using debt is a good thing and when you should plan to use cash?
Why You Must Raise Your Prices
This is a guest blog post from Howard Polansky of Cash Flow Coach.
Raising your prices is not about greed. It’s also not about inflation, though it does help offset the rising cost of pretty much everything these days.
The true reason to raise prices is two-fold. First, it allows you to work with the people that you prefer to work with because they seem to be the easiest to work with and understand the value you bring to their lives. Second, and more importantly, by weeding out the fringe, you will have more time to think of how to be even more productive without killing the business. Does this sound crazy? I hope so, but I can back this up.
How to Reduce Taxes Without Reducing Net Profits
Everyone likes being profitable, yet no one likes paying taxes. So, how can we reduce taxes without reducing net profit?
Retirement Contributions
Making contributions to your qualified retirement plan (SEP/SIMPLE IRA; Solo 401-K; etc) through your business can reduce your federal income tax, but does not reduce your taxable net profit. The cool and unique thing about this deduction is that the IRS allows you to make retirement contributions beyond December 31, up to the filing deadline of your main tax return, in order to maximize your deduction for the previous year.
Health Insurance Premiums
The health insurance premiums paid on behalf of the owner(s) work very similar to retirement plan contributions: They reduce your federal income tax, but not your business’s net profit. Health savings accounts can be used to achieve the same objective. First, make sure you’re eligible for the deduction. For example, if your spouse has health insurance through their employer and they have the option to cover the entire family, you may not be able to claim the deduction through your business.
S Corporation Conversion
If your small business is profitable (especially beyond $50K/yr) and you file taxes on Schedule C, you may benefit from electing to be taxed as an S-Corporation. This strategy will help you to legally reduce self-employment tax. But be careful when adopting this strategy. Electing to be taxed as an S-Corp comes with increased compliance issues, which means more fees. You’ll have a separate tax return to prepare, and you’ll have to run a payroll for yourself (which will require payroll tax returns). You’ll want to do this with the help of a tax pro. Make sure all of the extra fees associated with becoming and maintaining an S Corp do not eat up what would have been your tax savings.
Non-Business-Related Deductions and Credits
All business owners will eventually end up filing a Form 1040 (the main tax form), and it includes all of the credits and deductions that aren’t business-related. Make sure you are maximizing all credits and deductions outside of the business. They will not reduce your net profit at all but the tax savings can be great.
The main thing to remember about the 1040 tax return is that it includes ALL sources of income, and well as all of the available credits and deductions; not just the business stuff. The popular ones are the student interest deduction, charitable contributions, the Child Tax Credit, Earned Income Credit, etc. Reach out to your tax pro to see which credits and deductions you may qualify for.