In episode 16 we learned the basics of the Profit First system and now we will do a Profit First deep dive. With these steps you’ll learn how to manage your money to create a healthy business.
One Time Setup
When you first start there are three steps to setting up the Profit First system and you only have to do it once:
Set up five bank accounts.
You and/or your accountant will most likely have some resistance to this. You may be worried about:
Don’t worry about the cost because there are different ways you can get the fees waived.
Change. You will have resistance because this is a big change, but don’t skip this step because it’s the whole point of this system.
The five accounts are split into:
Set up two additional accounts in a separate bank for you profit and tax accounts.
This step is to try and eliminate the temptation of moving money between your accounts. It’s for the profit and tax accounts specifically because they will have money sitting there, not being used.
The trick is to know your limitations and according to what they are you can take the appropriate steps to keep yourself from touching those accounts. Another step you can take if needed is to not give yourself online access to these accounts.
Determine your target allocation percentages.
Target allocation percentages - a percentage for each of these categories and how it gets allocated.
For example if your firm has a revenue of 0 - 250k the percentages would be split like this:
Owner’s pay 50%
For all the money that comes in, it will be distributed into these accounts based on your target allocation percentages.
These percentages are not set in stone and are subject to change based on everyone’s own firm.
Using Target Allocation Percentages
Your target allocation percentages are a goal. You have to work towards them slowly because until now you’ve been using different percentages. Changing them drastically will throw you off course.
Determine the gap between the percentages you have today and the percentages you want and then over an 18 month period, you’ll slowly close that gap.
Twice a Month:
Pick two days of the month that make sense for your firm and those days will be when you:
End of Every Quarter:
End of Year:
You need to decide if this system is something you can implement yourself or if you need a Profit First professional to help you get started.
Let’s Start Taking Our Profit Home Today
Law Firm Growth Free Coaching Call
Episode 16 - Take Your Profit First
Profit First by Mike Michalowicz
Profit First by Mike Michalowicz Audible version
Profit First Cheat Sheet and First Two Chapters of the Book
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