How to Plan Now for Quarterly Profit Distribution
Here’s the thing about quarterly profit distributions: They’re meant to be used. And by “used,” I don’t mean reinvested in the business–as much as you might want to do that.
Every time you do your Profit First allocations, you should be taking 5% and depositing it into a Profit account. This the target distribution based on the Profit First system, and what we recommend to most clients.
Being a business owner is challenging. Being a business owner in 2020 has been exhausting. You’re working long hours, adding extra responsibilities to your plate, stressing over quarantines and lockdowns, and possibly even having really difficult conversations with staff and clients.
Through all of that, we hope you’ve still been setting aside your profit allocations. Because at the end of the day, you deserve it. You’ve done something that not everyone is born to do: you own a business.
The profit distribution is meant for you, the owner. It’s designed to reward you for your work; it’s not designed to reinvest into the business (that’s for a different account).
At the end of each quarter, take half of the balance in your profit account as a distribution and use it for something in your personal life. Something fun, something meaningful, something necessary. You get to pick!
You might be wondering… “But how do I spend it?” Here are some ideas, depending on how large that profit account is:
If your distribution is less than $250
- Treat yourself! It’s okay if your profit distribution is just enough for a celebratory dinner with your partner or a friend. Go somewhere you wouldn’t normally go and order something fancy.
- Visit the spa (or car spa). You deserve a nice massage or a facial, away from the office for the day. If that’s not your thing, treat your car to a detailing job that makes it feel brand new.
- Invest in learning. Here at Fit For Profit, we’re all about learning new things–personally and professionally. What’s something you’ve been dying to learn that you haven’t taken the time to do yet? Sign up for that gardening class or take that Rosetta Stone class so you’re prepared when we can travel again.
If your distribution is less than $2,000
- Beautify your home. There’s a lot you can do around your home for $2,000 and less, including some small remodeling projects or buying some new furniture or appliances. We’re spending a lot of time at home these days and we should enjoy it!
- Take a road trip. If you’re able, take a weekend away at a nearby destination. Sometimes getting out of our normal four walls for a few days is enough to rejuvenate us for months to come.
- Pay down debt. Personal debt can change how we think about money in our business too. We love the thought of using profit distributions to pay down (or off!) some personal debt so you can feel better all the way around.
If your distribution is more than $2,000
- Divide and conquer. Consider gifting part (or all) of your distribution to a favorite cause.
- Invest and save. If you’re not ready to spend the money, open a separate account and save it for a planned vacation or so you can pay cash for that new car. You may also want to invest it in a college fund for your kids.
I personally don’t always have a solid plan for my profit distribution. In fact, I really like to save it for a larger purchase. I’ve saved up for a car before, and I’m currently remodeling my kitchen with several quarters’ worth of distributions.
Whether you choose to spend it or save it, if you’re following Profit First you do need to remove it from your business accounts and put it elsewhere.
Not sure where to get started? Book a call with us and we can help!