Just about a year ago, fellow course creators Tim Geiss and Nate Dodson were on the podcast with me talking about a book I just finished: Profit First by Mike Michalowicz. It sparked a great discussion about handling some very important aspects of having your own business, and since I’ve now been using the profit first system for a year, I wanted to revisit this topic with you.
"Sales are a vanity metric. They don’t mean anything unless you put them into context."
-Tom Geiss
As evidenced by my continued implementation of what I learned from Profit First, I am a big fan of this way of accounting. It works, and it’s relatively simple to begin using. I hope you enjoy this blast-from-the-past episode – and maybe even consider changing your accounting system as a result. Let’s jump in!
In This Episode, We Talked About:
- (1:48) The accounting system I use
- (2:54) The underlying concept behind putting profit first and what that means on a practical level for my business
- (4:16) A recap from my conversation last year with Nate and Tom about Profit First
- (5:10) Tom’s reasons for implementing this accounting method and how he feels it benefits his business
- (7:39) How long it took for me to start implementing profit first and how often I initially was revisiting my system
- (10:28) The business credit card that all three of us have found useful
- (11:46) Why you can still use this system without rigidly following every single guideline
- (12:55) Nate’s question about how Profit First actually benefits businesses and my early takeaways
- (17:59) The minimum percentage of profit that this system has you start putting aside each month for emergencies
- (19:44) How putting profit first helped Tom feel less uptight about spending money on growing his business
- (21:36) The way this process allow for a steady personal income and regular bonuses despite monthly profit fluctuations
- (25:38) Tax implications for different types of business structures
- (26:44) The difference between being an employee and an investor
- (29:42) How using the profit first system affects operating expenses
- (31:17) A mistake I probably wouldn’t have made if I was using this system earlier
- (32:03) The role of a business emergency fund in Profit First context
- (35:21) “The Vault” - an advanced profit first technique
- (36:12) Why this system keeps profit and tax accounts separate
- (38:10) How putting profit first could benefit one of Nate’s other business
- (42:23) Moving from the owner-operator role to being an owner working on the business rather than in it
- (43:18) A quick look at FICA accounting
- (47:14) How the profit first concept works as you initially implement it
- (48:36) The percentage of revenue to set aside for taxes and other categories
- (52:33) The main point of Profit First
- (53:18) A tip from Tom on operating expense decisions
- (56:08) The best type of bank accounts for profit first accounting
- (57:56) How the profit first concept could work for businesses beside online courses
We discussed all that and much more, so don’t forget to leave a comment and let me know what you enjoyed about today’s flashback episode!
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