If you’ve been reading my posts for a while, you know that CFO on Speed Dial is all about breaking down numbers and finances in ways that are accessible and actually make sense for you, the small business owner.
Money doesn’t have to be hard!
One book that best demonstrates this truth is one of my personal favorites, Profit First by Mike Michalowicz.
You’ve probably heard of it since it’s just about everywhere on the internet...especially in the business and entrepreneur space.
I actually own several copies of this magical book and have also become a certified Profit First Professional.
Why am I so in love with Profit First?
Well first, because it works. It has changed my business and helped so many of the companies I work with become more profitable, build up cash reserves, and fuel growth in their business.
The second reason I love Profit First is because it’s so easy to understand and get started!
This book and system apply very basic but powerful personal finance techniques to managing cash in order to run a profitable business. And while it is deceptively simple in concept, Profit First is also tricky to implement well.
In the 6 years I’ve been a Profit First Professional I’ve gotten a lot of questions from business owners about it. So I know there are a lot of myths around using Profit First in your business.
That’s why I’m going to break down 3 of those myths to give YOU a better understanding of why Profit First could be a great option for your business.
3 Myths About Profit First
Myth #1: Profit First is only for cash poor businesses.
False.
Profit First can help businesses struggling with their cash flow.
However, Profit First is most powerful for companies with a bit of money in the bank that needs to be managed. After all, when you have cash, that’s when you start to feel that urge to spend and when you can really use some guardrails to guide your spending decisions.
What better time is there to focus on profit and implementing a new system than when you aren’t super stressed about cash flow AND when you have money to work with?
Together, Profit First Professionals have worked with over half a million businesses to implement Profit First, and our data shows that companies that implement Profit First grow more rapidly than companies that don’t. I can also show that companies that implement Profit First are more likely to build up a sizeable cash reserve, which makes the companies more resilient even when big economic issues -- like a Covid shutdown, short labor supply and big supply chain disruptions -- interrupt your business.
Profit First can help your business when it’s struggling, but it can especially help your thriving business to get to the next level and ensure that you, as the business owner, are harnessing the power of profit.
Myth #2: I don’t need to open all those Profit First bank accounts, I can just use a spreadsheet to allocate profit.
Honestly, this is what I thought at first, too. I read the book, loved the simple concepts, and tried to implement the ideas on a spreadsheet for my business. But truthfully, it didn’t go very well.
I’m a CFO. I’m an expert. I love numbers and finances, but labeling something as profit on a spreadsheet isn’t enough. It doesn’t fundamentally change how you manage money or make spending decisions.
Moving cash into a bank account labeled Profit Reserve does. Moving cash into a separate bank account is a behavioral change that shifts expectations for how those funds can be used and THAT reinforces a change in decision-making around spending.
About the time that I realized this, I had the opportunity to hear Mike speak at a local event and heard about his plans to launch an organization to train coaches, bookkeepers and accountants in how to implement Profit First. I was in as a Profit First Professional!
I’ve been using it for over five years now, and it makes a huge difference.
If you want to experience the power of Profit First, you have to open a separate account to stash your profit reserve. That is the quickest, most direct route to success.
Myth #3: Profit First can be used in my business without guidance from an expert.
Okay, this one is true AND false.
You can read the book, do the research, listen to podcasts, and watch all of Mike Michalowicz’s many YouTube videos to try and implement Profit First on your own.
The knowledge is out there for the taking, but without some accountability and guidance, you likely won’t get the traction and results you could with the support of a pro.
Here’s why: because we all bring a lifetime of habit and behaviors to how we think about and deal with money. DIY-ing a habit change is HARD. Shifting money beliefs is even harder.
As you implement Profit First, you’ll be changing how you make financial decisions in your business. While the first step is simple; those underlying changes are a huge challenge. This is why having an expert to guide you and work with you through the process is so important and powerful.
In fact, speaking of Mike Michalowicz’s YouTube videos here is a great one on this very topic.
With a Profit First Professional expert in your corner, you will make faster progress and see more cash profit in your business.
How can you start working with a Profit First Professional now?
I’m super glad you asked!
Join CFO Advisor. Our CFO Advisor program gives you expert guidance as you put our financial framework in place quickly starting with Profit First implementation. You’ll continually hone your financial knowledge and skills; and maintain accurate and up-to-date information in an efficient and seamless process.
CFO Advisor is a 6-month program that provides CFO support through a mix of 1:1 and group sessions plus online skills building. Learn how to manage your finances, boost profits, and upgrade your financial decisions based on meaningful information.
If you want to know if it’s the right choice for your business Let’s talk!