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!