How Do I Start Profit First in My Business?
About this episode
If your profit just sits in your operating account, it will get spent: on unexpected repairs, unplanned purchases, or simply because the balance looks healthy. Paying yourself isn’t the same as taking profit, and most owners don’t realize their profit is quietly disappearing.
In this episode, Kerry explains how the Profit First cash flow management system works, why it uses multiple bank accounts (she has 20 in her own business), how quarterly profit distributions reward you as the owner, and how home service businesses can get started.
Listen now on:
Key takeaways from this episode
- Profit left in your operating account tends to get spent without you noticing.
- Paying yourself and taking profit are two different things: you should do both.
- Profit First gives every dollar a job: payroll, materials, taxes, owner pay and profit.
- It works with your habits: you still check your bank balance, but you see what’s really available.
- Start with a few bank accounts and add more as your business grows.
- Owners can take 50% of the profit account balance as a quarterly distribution.
Show notes
Why Kerry is passionate about Profit First
Kerry has used Profit First since 2015 and recommends Mike Michalowicz’s book, especially the audiobook if you spend your days on the truck. Sticking to it rigidly over the last four years has made a huge difference to her own cash flow.
Paying yourself isn’t the same as taking profit
Whether you’re on payroll or take draws, you should be paid for your work. Profit should be on top of that. Kerry asks owners to think honestly about where their profit actually goes.
Every dollar gets a job
Profit First moves money out of your operating account into accounts with a purpose, like payroll, rent, materials, subcontractors, taxes, owner pay and profit, so you’re not caught short when bills are due. A client implementing it is getting used to a lower operating balance, knowing the rest is set aside.
Multiple bank accounts, without the overwhelm
Kerry runs her business on 20 accounts, but she doesn’t start clients there. Managed by a firm that understands Profit First, multiple accounts are simple, and many owners end up asking for more.
Quarterly distributions and getting started
Owners can take 50% of their profit account balance each quarter. As a Certified Profit First Professional firm, Abacus helps businesses implement Profit First, or get their books up to dat