I Switched to Profit First Accounting - One Year Later
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- Опубликовано: 7 сен 2024
- As a small business owner, I haven't always made the best choices, financially. After reading Profit First, I committed 100% and a year later I look back at the impact it's had and how my understanding has shifted.
This is completely unpaid. It's just made a huge difference for me. I don't even have an affiliate link for the book. Maybe one day.
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If you're into Instagram, you can find me @colonelshaun
/ colonelshaun
Hire me at boomreactive.com
Kit information at kit.co/colonel...
Shaun, I am so glad that Profit First is serving you and your business!
I’m happy about it too! It’s the only reason I’m still in business. And clockwork is now shifting my business toward sustainability, but as a freelance video producer, it’s TOUGH.
@@ShaunHautly That is amazing to hear. I am humbled every time I hear success stories from business owners who have had such success with PF. What is your biggest hurdle "clockworking"?
My biggest hurdle is this: as a freelance creative, I'm often hired for my portfolio, style, and ease to work with in the sales process. These are difficult things to hand off or delegate, because my clients expect conversations with me. While some tasks are easy to remove from my plate, I struggle to find ways to remove me from the harder parts.
The story in clockwork of the painter who did the faces and let their staff paint the dresses struck a chord with me, but it's tough to make that leap with how integrated video production is.
It's not impossible, it's just really tough. And it's a serious investment to make it to the first tier of having "help."
@@ShaunHautly Hi Shaun, we're clockworking our business now, too and often have this "only I can do this" thought. I see you responded to this 11 months ago...how's it going?
Dude I listened to the book twice and your explanation of if made it so much more digestible for me. Thank you, thank you thank you!
Glad it was helpful! Good luck on your way to profit!
I'm glad this system is working for you! I've seen it help a lot of business owners. I also use this in my personal finances and it's been soooo helpful.
Yeah! After doing it last year with my business, I did it for myself this year. The clarity is amazing.
I just started profit first and I'm loving it so far!
Welcome to the club! If you have any tips or questions, throw ‘me out!
Absolutely fabulous share bro. I have the book, I’ve been coached on the process, I’ve watched a lotta videos, and even emailed Mike himself. This is really good and I wish you & your family, business, and clients all the success.
I love to hear it! Thanks! I hope you find the system as wonderful as I have! I'm a convert for life!
Yes! I’m also loving the Profit First system. So much more clarity!!!!
Me too!! It's actually made surviving the pandemic (so far) much much easier, financially. I think I'm going to make a video about that, too.
Thank you for sharing your experience!
My pleasure!
Dang! Where are you that taxes are 7%? For both federal and state income tax and state sales tax, and self-employment tax, we have to set aside 30%.
I don’t full understand or agree with the system, but because I file my taxes as an S corporation, things are slightly different. On my actual personal income that “my company pays me” (around 50% of my revenue) the 7% that’s set aside becomes 14%. In addition, the payments I make for myself are subject to withholding and the other taxes that get removed from most people’s paychecks.
I’ve only done one year with this system and will be tweaking them numbers as begin to work again post pandemic.
I feel like this would be great if I actually knew how to implement it. Managing my finances as a freelancer is hard enough as is, switching everything up feels super intimidating...
It's not that huge of a switch. They annoying part is finding a bank that will let you open multiple accounts with no minimum balance requirements. Have you read the book yet?
It is worth it. I did it in just 30 days and already have over 2000 saved up in business!
@@ShaunHautlyagree
Excellent! Thanks for sharing.
My pleasure! If you try it, I hope your experience is as good as mine.
Just discovered this and have started implemented it.
Glad to hear it! I'm three years in and still loving it. Tomorrow is money day (meaning I'm doing all the bookkeeping).
Novo Bank has Reserves where you can set up all of the reserve categories in that one account.
Nice!
I'm not sure how it works with Novo, but I needed separate accounts so that I could have separate debit cards for some of them. I had a tough time finding a bank that wouldn't charge fees for zero balance accounts, and the one I ended up with isn't great. I'll look into Novo!
I hope you are also putting money into retirement funds and health care :`D I`ve seen many small business owners fall into poverty when they had to retire because they didn`t prepare for it.
Yeah, that's all in my expenses. Retirement fund has had to wait for some debt to be paid down, but it's all finally accumulating.
Thank you for sharing your video. I learned a lot from you.
So glad it was helpful! Good luck! Get profitable!
Yes mate, really enjoyed your explanation 👌🏽
I’m on chapter 6 and really buying into the theory. Struggling with all the terms OPEX etc at the minute though 😂
Ha. You'll get the hang of it. And you'll change things around to make it work best for you. Name things whatever you want!
OPEX IS OPERATING EXPENDITURE which is maiming running costs for your information 😊
Great video man, I noticed you mentioned that you are also doing this in your personal life, have you found a bamk that offers the flexibility of having mutiple accounts, automatic transfers etc? I have one for business and works fantastic I have not been able to find a bank that does this with personal accounts yet. Any suggestions?
I haven't setup multiple accounts to do this in my personal life at this point. I use American Express Business Checking to manage all the accounts now, and I mostly love it. I just don't have a recommendation for the personal side yet. Sorry!
@ShaunHautly no problem thanks for the reply, sorry I thought you mentioned that you did in the video no worries at all appreciate you getting back to me thanks again!
I’ve been wanting to implement this sooooo bad but I can’t seem to find a bank that wouldn’t make me bankrupt with all these fees associated to each account.
Not sure where you are, but look for a smaller, local bank or credit union. The big banks are full of fees. I'm in the Midwest in the USA, and I use "Midland States Bank." No fees as long as they're not overdrawn. Not the smoothest online banking experience, but it was a necessary trade off for me.
The book also has some suggestions for bank accounts to use from some bigger banks.
Eric, I use US Bank business silver checking accounts for all of my Profit First accounts. I don't use savings accounts because the rates are so minimal it's not worth it. I set up these accounts: Income, Profit, Operating Expenses, Tax, Owner's Pay, Debt Eradication Charitable Giving. After a year and a half of using it this way, I'll never go back. Just set it up and do it, you won't be sorry.
Ohh, I followed your website link, you actually have a REAL business and.. the videos look amazing!! :-)
I was afraid this youtube channel is your "online business" as that is what people usually call it these days 🤣
Great report about your adaption and success with profit first! 👍🏻
Ha, thanks! This RUclips channel DOES earn me about $55/month, but I agree, that falls quite a bit short of “online business.”
Hi Shaun! Thank you for your in depth review of the Profit First system. If you don't mind, may I ask what you do for a living? I ask because it seems we might be in similar fields and to hear from someone similar to me would be fantastic. I'm starting up a single-member LLC that is primarily freelance photography/videography, but I also am a content creator on RUclips and was hoping to tie the two together. In my research, I've come across the Profit First system and then accordingly, your video. Any additional advice for someone like us? Thanks!
I AM a videographer/photographer (in that order). I think our industry is different than most because we're SO dependent on gear. That's a huge expense and good gear can make the difference between being capable of a big gig or having to pass. I spent a TON of money over the past 12 years on gear, upgrading it, and constantly trying to be over-equipped and ready for ANYTHING, even though I ended up renting a ton of stuff when I needed it and not even using my own gear. There are a few pros to that approach, but way more cons.
I made a video about this metanoia about a year ago (a different time, indeed). ruclips.net/video/JEixH56mVys/видео.html
My advice for video production is to be very very deliberate about your gear budget, and to pay yourself first. Only because I've been adhering to this system for the past year am I able to survive this long during Coronavirus when most video production has been shut down. Smart money management has saved me from what would have been a financial disaster if it happened two years ago.
Shoot me a message on IG, I'd love to chat, but my simplest advice boils down to this: Don't spend too much money on gear.
Thanks for the vid. I need more clarity please. I have a digital agency. I pay my appointment setter, sales guy, and fulfillment team on every client job I land. That being said on a $2k deal would I pay them first, let’s say $900, that leaves me with $1,100. So would I be breaking down $1,100 based on the profit first plan? Thanks
Yes, that’s how I do it. For me, if that $2000 is a video gig I get and I need to pay my crew $900, then I pull that out beforehand and deposit it into my “contractors” account. That way I’m never messing with money I owe my team.
However, for things like insurance and other regular business services, I pull that out of my operating expenses budget which is a percentage of that remaining $1100. I do it that way to make sure I make smart decisions. If I don’t have enough in my Operating Expense account to afford my insurance plan that forces me to decide to either reduce my insurance or charge more to make sure I’ve got expenses like that covered.
Does that clear things up a bit?
colonelshaun man thanks a lot yes it makes sense. Thing I’m also hung up on is the order in which to take out the percentages. Like after paying your contractors do you take out tax next on that $1,100? Or what’s the order you do it in? Thanks again bro
Brandon Lukaszewski shoot me a message on IG and I’ll show you my spreadsheet and how it gets divided up.
Hey Shaun! So how would this example work for deposits? Let’s say the video project pays $2K and you pay your contractors $900. But the payment for the project is structured 50% deposit and 50% when completed or whatever. Would you just take the whole $900 for the contractors out of the $1000 deposit?
This reminds me of “T” accounts in accounting class
It’s similar, just with several separate T accounts (if I’m remember accounting class correctly, ha).
I respect your review yet I think It might be ideal for a service based business system rather than a traditional business system, where you sell items to make profits.
According to profit first, you take a whopping 50% for owners pay and a very little in profit.
A product based business thrives on it's inventory, specially when starting. More money circulating, you grow much faster. You're getting what I'm saying?
I get what you're saying! I wish I were better with finances so I could give better advice.
I agree it's easier to see with a service based business, but it's also applicable to a product based business. The system is about identifying your expenses (including Cost of Goods Sold) and adjusting your prices from there to make sure there's enough revenue to cover everything. From there, thoughtfully dividing that revenue to get yourself paid properly and still afford the next round of products you need to buy/make, is what the system is all about.
Again, I'm not an expert, but the big takeaway is that if you're not setting money aside ("profit") and paying yourself a living wage, then something is wrong with your expenses or your revenue and you need to adjust one or both of them.
So it does apply, but I agree, it gets a little trickier when you can't control all elements of your pricing (like market value of the goods you need to buy).
The book is a great read and would explain things a LOT better than I can. If you give it a shot, let me know how it goes!
Cheers!
This is cool but it’s much harder when you have a big staff
I don't have a big staff, so I can't speak to it, but as I've talked with larger companies that DO use Profit First, it seems to apply all the same. You have an account for salaries, and an account for profits.
The book itself talks about working with larger companies more. If you haven't read it, give it a go!
I just finished reading it. I loved it. One thing that doesn’t get mentioned in the book and it’s a huge omission in my opinion is when you take write offs like I currently do for things like gas and car insurance, etc.. How does that factor in versus just taking that money as a salary, and paying it in regular taxes from Tax Account. I think this is a huge thing that’s missing from the book. Not one word on it and I can’t find any info on it in Google either.
I think it just reduces your tax liability. It doesn't affect your expenses: you still need to buy gas and pay for insurance. But your tax accountant should factor that in to reducing your tax obligation. Write-offs don't affect your income (in my experience). So it shouldn't complicate anything.
I'd ask your tax preparer for their opinion. I write off tons of stuff, and it doesn't chance my bookkeeping.
Good luck!
So you would move all that stuff into OpEx account and pay it from there?
Yep. Just like any other expense. And the corresponding payment out of my tax account will be reduced, but there's no need (from my perspective) to complicate things beyond that.
you got me at account for gear! lol nice video
Ha, and that's the account I use most often... :-)
Verrryyy nice video...
Thank you so much 😀
What about savings?
With my business, I don't really have "savings." I keep the operating expenses account with a few months of runway in it, but any "extra" money I pay out to myself and put a percentage in my personal savings account like I do with any compensation I take.
Good video except him wearing his hat to the side like that.
That's the best part!
Maternity leave 😂
I just did round two of leave for our second kid, and I'm grateful that my money is still visible (what's left of it, ha!).