Grow Your Business Fast With Profit First Technique ? STOP Doing This Financial Mistake Now

Introduction

This tutorial outlines the Profit First technique, as discussed in the video by SeeKen. This method, created by Mike Michalowicz, transforms the traditional approach to managing business finances by prioritizing profit. By following these steps, you can avoid common financial pitfalls and grow your business faster.

Step 1: Create Five Checking Accounts

To implement the Profit First system, start by setting up five separate checking accounts:

1. Income Account: Where all revenue is deposited.
2. Profit Account: A separate account for profit allocation.
3. Owner's Pay Account: For your salary as the business owner.
4. Tax Account: To set aside money for tax obligations.
5. Operating Expenses Account: For all business expenses.

Practical Tip: This separation helps you manage funds more effectively and ensures that you allocate money correctly from the start.

Step 2: Find Your Allocation Percentage

Determine how much of your income should go into each account. This is your allocation percentage.

1. Analyze your past income to understand typical revenue.
2. Set realistic percentages based on your business needs:
   • Profit Account: 5%
   • Owner's Pay Account: 50%
   • Tax Account: 15%
   • Operating Expenses Account: 30%

Common Pitfall: Avoid being overly ambitious with your percentages, as this can lead to cash flow issues.

Step 3: Establish Targets

Set specific financial targets for your business. This can include:

• Monthly revenue goals
• Profit margins
• Expense thresholds

Practical Tip: Use these targets to motivate your team and guide decision-making.

Step 4: Allocate Funds Regularly

Implement a routine for allocating funds to your accounts:

1. Schedule regular allocation days (e.g., weekly or bi-weekly).
2. Transfer funds from the Income Account to the other four accounts based on your predetermined percentages.

Practical Tip: Automate transfers where possible to maintain discipline in your financial management.

Step 5: Increase Profit Gradually

Focus on increasing your profits over time:

1. Review your profit margins regularly.
2. Identify areas for cost reduction while maintaining quality.
3. Increase prices if feasible, based on market research.

Real-World Application: Small incremental changes can lead to significant profit increases over time.

Step 6: Move Profits to Separate Banks

To safeguard your profits:

1. Open a separate bank account for the Profit Account.
2. Transfer profits into this account immediately after allocation.

Practical Tip: This prevents the temptation to spend profit, keeping it reserved for growth or future investments.

Conclusion

By following these steps, you can successfully implement the Profit First technique in your business. This approach not only prioritizes profit but also ensures better financial management, leading to sustainable growth. Next, consider reviewing your financial strategies regularly and adjusting your allocation percentages as your business evolves.