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.
What’s the Problem in Your Business?
Without enough money in your business, you’re likely running into one or more of these problems:
- You’re not paying yourself enough
- You’re paying yourself last, if at all
- There’s never enough to pay the tax bill
- You need to hire but are afraid you can’t afford it
- There’s never enough left in your business account at the end of the month
- You’re stressed about money…all of the time
- Revenue is increasing, but there’s still not enough money
Sound familiar? These are some of the most common challenges we hear from prospective and new clients, before they set up guardrails.
It’s not your fault you’re in this situation. Bringing in more revenue is the old-school answer to financial woes in business. But it wasn’t the best answer before and it certainly isn’t now.
The real answer? More profit. And better systems.
Why Are You Putting Profit Last?
Because so many business owners are focused on increasing revenue, they’re thinking about profit last. You know what happens when you put your family, spirituality, and health last. And it’s not good.
So why would you put your profit last and focus on revenue instead?
The old business model uses the formula:
Sales – Expenses = Profit
But let’s change where you’re focused instead and use a new formula:
Sales – Profit = Expenses
Talking About Money is Hard
We’re conditioned to feel really uncomfortable talking about money. It feels too real. And a lot of shame comes up about past mistakes or even fear around current money mistakes. But NOT talking about money is just going to result in more of the same.
Focusing on the profit in your business doesn’t mean you’re going to:
- Focus on your P&L
- Force yourself to live on a strict budget
- Dip into savings for payroll or taxes
- Deplete emergency funds (if you have that!)
- Have to invest more money in your business
- Be stuck with a system you can’t change
Nope. Instead, talking about and focusing on your profits means you’re going to set up guardrails in your business.
I’ve shared about Parkinson’s Law before, but essentially this means that our demand for a resource increases to consume the entire supply.
So if you have more time than you need to finish a project, it will take you all the time you have to finish. If you have more food available than you have an appetite for (think: buffet!), you’ll likely eat a lot more than normal. And if you have more money than expenses each month, you’ll find a way to spend that money.
Don’t think that this applies to you? It’s actually a law of psychology. It applies. It’s way too easy to overspend when the money is available to you.
The way around it is guardrails.
How to Use Guardrails in Your Business
Using a food analogy, guardrails look like…
- Putting part of your meal in a takeout container
- Filling up on the good things first
- Removing the snacks and sweets from the equation
- Quitting the mindless eating
We need these to protect our money from ourselves and to keep us on the straight and narrow when it comes to money. Think of these like guardrails on the highway that keep traffic moving and flowing in the right direction. That’s what we want for your money so here’s how that works in your business.
The four guardrails that you can establish for your business are:
- Reducing your plate size
- Eating your vegetables first
- Removing temptation
- Establishing frequency
Reduce Your Plate Size
When you think about weight loss, you know that extreme dieting doesn’t work. It’s all about reducing your portion size. If your plate is too full, you’ll probably eat too much.
The same idea applies to your finances. When you look at your bank account and see money in the account, it’s natural to spend it. After all, the money is there just waiting to be spent.
If you reduce the size of your plate, you’ll eat less. And if you reduce the size of your bank account, you’ll spend less.
Using the Profit First system, we recommend creating multiple bank accounts to use for different purposes. Income, profit, owner’s pay, taxes, and operating expenses. We won’t go into how to use each of these accounts here, but you can grab a Profit First Overview below to help.
Download Your Free Profit First Overview Here
Essentially, you transfer a percentage of your revenue to these accounts twice a month, every month.
Eat Your Veggies First
As a wellness professional, you know it’s important to fill up on the good stuff first so you’re less likely to indulge on the stuff that’s not good for you. In business, your veggies are your profit, owner’s pay, and tax savings.
When you remove these three things from your main bank account, you’re guaranteed to have profit, a paycheck for yourself, and money for taxes.
This forces you to be innovative and creative when paying expenses because you’ll have less to spend on operating your business, but that’s the whole point! We don’t want you to spend as much as you have been in the past. Removing money removes temptation.
When you’re trying to quit a bad habit, there’s little worse than seeing temptation wherever you look. That’s why we avoid having treats in the house when we’re trying to cut back on sugar.
If you log into your bank and see your profit and tax accounts with money in them, you might be tempted to “borrow” from them. But the likelihood of you paying those accounts back is slim to none, which means you’re actually stealing from yourself.
Remove the temptation to borrow by creating profit and tax accounts at a different bank, one with no online access, no checks, no debit cards, etc. This makes it difficult to access these funds, which is exactly what you need.
Starving yourself to lose weight doesn’t work; it creates a situation where you’ll binge at your next meal. And if you always have a bowl of chips on your desk, your hand is going to dip into those chips way too often. That’s why we eat at specific intervals, breakfast, lunch, and dinner…maybe a snack.
If you dip into your accounts too often or make your transfers too often, you might end up making bad spending decisions.
Instead, we allocate money from our income account to the other four accounts on a regular basis. This might be once a week, but our goal is every two weeks or twice a month. We just don’t want to move the money too frequently because then we don’t learn what this system has to teach us.
What to Do Next
It’s time to get started and keep more money for you, the business owner. Start by setting up your bank accounts (income, profit, owner’s pay, taxes, and operating expenses). Then determine how much you’re going to transfer to each account from your income account. Finally, start planning some goals you want to hit now that you have financial systems in place.
This is like just getting your clients to come to the studio or gym three times a week. That’s the first goal, right? We don’t worry about using weights at first; just get them to show up. If you can get them in the habit of showing up three times a week THEN you can improve their lifestyle with diet changes.
We just want you to get in the habit of allocating your money into those four accounts on a regular basis THEN we can start to improve and reduce expenses to increase profit.