What I learned from Profit First
When I first started reading Profit First by Mike Michalowicz I thought two things:
- Open 5-7 bank accounts?! No way
- How will this work for a retail business? This book is for service-based businesses.
I read 4 chapters and put the book down. For almost one year.
I noticed “Profit First” kept coming up in conversation with Shopkeepers in Master Shopkeepers.
I like to procrastinate like the best of them but I also know I respond well to accountability. So in order to tackle this book I created a study group and nearly 1/5 of the Savvy Shopkeepers members joined in. One-fifth! This confirmed that reading the Profit First book was a must.
The plan was to read 2 chapters per week until we finished the book. I went Live on Facebook every Monday to talk about the two chapters I read. Some of my live videos went as long as one hour so there is a lot to cover but I’ll keep this brief.
Here are the most important takeaways for me, as a brick and mortar store owner:
- Don’t fight the way our brains work. I will be the first to admit, prior to setting up the Profit First system, I checked my one business bank account balance every day. I learned from Profit First that one cumulative balance isn’t the best representation of the health of my business. But a daily account balance check is common for most business owners. So instead of fighting the daily balance-check, the author recommends setting up multiple bank accounts. Income, profit, owner’s draw, taxes, and operating expenses. This provides a more clear picture of the state of your business.
- It is NOT difficult to set up multiple bank accounts. Our business banker was more than accommodating with our request. Yes, it takes some getting used to but after the first few weeks, it’s just another system and process in our business.
- Profit First CAN work for retailers. You might find you want to set up additional accounts, one for sales taxes, one for an Open-to-Buy budget, make the system for YOU.
- What I ‘ve been preaching all along….PAY YOURSELF, is more than possible for most business owners.
- You can start small and save as little as 1% for profit if you want. We went with 5% but I think we’ll bump this up to 10% by the end of 2019.
- Profit can be used for many things. The money saved in your profit account can be used to pay off debt, you can let it accumulate to pay for a project or upcoming purchase, OR use it pay yourself a BONUS!
- The most important lesson learned: PAY ATTENTION TO EXPENSES. Setting up the Profit First system for our business has taught us to focus on expenses and think of ways to save. You will review each and every one of your expenses. You’ll choose to cut the expense, find a more affordable solution, negotiate the price of the expense. Even if you think you are already thrifty, this process might surprise you!
How Profit First has changed our business:
- We now have an account where we save a percentage of profit every week and we have NOT touched it.
- After taking a hard look at expenses we started implementing some changes and gave ourselves raises!
- We have an account set up to pay the IRS every quarter… now April 1st won’t be so scary.
- We know exactly how much is in our Operating Expense account and what we can spend because dipping into the other accounts is a NO-NO.
I highly recommend the Profit First system for ANY business and I’m here to tell you it’s not perfect for retailers but it can work with some tweaks.
If you have any questions about Profit First, comment below or contact me! I’m happy to answer questions.
If you’d like to purchase the Profit First book, please purchase it at your local bookstore or you can purchase it online here:
*Please note that some of the links above are affiliate links, and at no additional cost to you, I will earn a small commission if you decide to make a purchase after clicking through the link. I recommend them because they are helpful and useful to shopkeepers, not because of the small commissions I make if you decide to buy something through my links. Please do not spend any money on these products unless you feel you need them or that they will help you achieve your goals.
Want to learn more?
- Follow Savvy Shopkeeper on Instagram or Facebook or sign up for email updates!
- Learn about our Mastermind for Store Owners or 1:1 coaching.
- Listen to the Savvy Shopkeeper Retail Podcast.
I share some of the most helpful information and tips for retail business owners on the Savvy Shopkeeper Retail Podcast. I know you’re busy so episodes are short and sweet at around 20 minutes. Want to work less, profit more, and grow? Listen on any of these platforms: