How to Achieve Profitability Using the Profit First Formula
Take a few minutes and ask yourself some serious questions. Is your business profitable? Have you been selling more yet profiting less? Are you struggling to make ends meet because you just aren’t making enough money? If this is the case, and it frequently is – especially for new small business owners (so don’t feel bad!), there are things you can do to change this.
Everybody wants to earn more and many times we view this as needing to work harder. But sometimes it’s just a matter of managing your cash differently. Read on to learn how you can change your business mindset and the financial health of your company.
Flip the Traditional Formula on Its Head
Here’s an interesting notion: You don’t have to wait years for your business to become profitable. You really don’t. Think back to what you’ve likely been taught in the past about paying yourself first. Remember? The whole concept of taking 5% to 10% out of every paycheck and putting it into a savings account for a rainy day? And then you pay your bills with whatever you have left.
Well, guess what? You can apply that same concept to your business today. And in doing so, we can take the old formula of sales – expenses = profit and flip it on its head. Instead, let’s consider using the formula of sales – profit = expenses. Using this adjusted formula will put you in the mindset of being more profitable.
When you first start out, taking 5% to 10% out in profit will probably be a challenge. You might have to go with a smaller percentage like 1% or 2%, but that’s okay! Just doing this at all will help change your behavior and how you think about your business and its profitability potential.
Shift Your Financial Mindset and Behavior
If your business is anything at all like most new businesses, after deducting expenses there’s probably very little or nothing left over. And certainly not enough to live off! So that’s why it’s so exciting to learn about this profitability mindset shift. Check out the book Profit First by Mike Michalowicz. In it, he teaches us all that we can start to change our behavior around how we manage the cash that comes into our business.
A Final Word From Tuesday P Brooks, Founder of AJOY
Making enough money to survive and thrive is obviously one of the key requirements of running your own small business. If we aren’t profitable enough, our business won’t be sustainable for the long-term. But we all have to start somewhere, right? And the majority of us struggle financially in the beginning, finding it a challenge to make ends meet. Yet doing our research and being open to a change in our financial mindset might be all it takes to turn things around. And if you try but still need help, please don’t hesitate to reach out. As a Profit First Professional, we can help you set up your financial system so that you can profit first too. Now, you have this! Keep moving forward and being amazing!