“True abundance isn’t based on our net worth; it’s based on our self-worth “
– Gabrielle Bernstein
Do you pay yourself what you are worth? I don’t. It’s something that I have struggled with since I started my own business. This money block stems down from a self-belief issue that I’ve been working hard to overcome.
It’s also one of the reasons that attracted me to “Profit First”, and it’s fast become my favourite business book of all time.
So What Is Profit First About?
Profit First works on the premise of Parkinson’s Law. It says that your work will expand to fill the time available for its completion. For example, if you give yourself a deadline of one week to complete your taxes, you’ll do it within that time frame. However, if you give yourself six weeks, well normal human behaviour dictates that is how long it will take for you to complete the job.
Profit Firsts asks the reader to apply this principle to your business. Instead of using the old accounting formula of Income – Expenses = Profits the book asks you to flip that upside down and use Mike Michalowicz new method of Income – Profit = Expenses.
The idea behind this new concept is to take your income and before paying any bills deduct a predetermined percentage of profit. Inside the book, Michalowicz gives readers a few recommendations on how to work this out for themselves, but you can also find this resource for free on his website.
In summary, it’s all about paying yourself first and letting the leftovers drive your budget.
Besides this business changing formula, Michalowicz brought up a few other tips that resonated with me. Here are some of my favourites that I’ve already started implementing in my own business.
Be Picky About Whom You Do Business
Not all income is created equal. To be successful business owners, we need to know when to say no to a client. I know this can be a hard pill to swallow. None of us wants to turn down business. We want to make extra money so we can to keep our business afloat, but is it worth it?
In the book, Michalowicz gives an excellent example of this conundrum with his lawn service guy deciding to offer a gutter cleaning service. What started off sounding like a great idea to make some extra cash soon turned into a massive unwanted business expense with little return.
This story resonated me and prompted me to think about the services I offer clients and review that current projects on my plate. Am I taking on too many clients and providing too many services? Does current list of services meet my larger business goals?
By asking myself these questions, I’ve ensured that every time I go to work, I am working closer to my goals and while the distractions produce income, they are not helping my achieve my dreams.
Work Smarter Not Harder
I have a confession to make – I am a bit of a workaholic. My business is my baby. I love it with all my heart, and when I’m not in the office, my mind is still always buzzing with new ideas to implement or figuring out a tough business problem.While there is nothing wrong with being a workaholic, it can get you stuck in a rut and diminish your creativity.
In Profit First, Michalowicz touches on halving your efforts to double your results. He asks business owners to assess not only where they can cut expenses, but also work habits and tasks that suck our time. He challenges the reader to see if there are better ways of doing things and how wisely we are using our time.
Since implementing this nugget, I’ve managed to identify a few recurring costs that I’ve kicked to the curb, and I’m more aware where I’m bleeding my time and energy.
It’s only been one month that my company has been fully immersed in Profit First and already I’ve seen our business’ finances transformed.
As someone with a background as a Financial Planner, I’m pretty in tuned with the money coming in and out of my business, and this formula plays to my inner number geek. It’s given me a push in the right direction to pay myself what I’m worth and get over this self-belief issue that has been holding me back.
Now every time I need to make a business decision I refer SOLELY to my expense account. Do I have enough money to invest with my mentor? Do I have the capital to bring on another team member? Can I afford this copywriting course? The answer to any question that revolves around spending money can now be quickly answered without hesitation.
If you are a business owner and want to stop the debt cycle and start turning a profit right away, I highly recommend picking up a copy of Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine. Also, once you do, drop me a line – I would love to hear how this book has transformed your business!
Mike has a NEW version releasing in a few days be sure to pre-order your copy right away.