There are only two ways to make more money improve income, decrease outgoings and if you do both you get a double whammy.
What I want to share today is a “system” that we’ve been using and has worked to great effect. Mike Michalowicz, writer of The Toilet Paper Entrepreneur, has written a real gem of a book to help entrepreneurs be more profitable. The book, Profit First is a really easy to follow, succinct manual on how to approach your business finances.
He acknowledges his own failings, which led to near bankruptcy after a massive injection of cash after selling his business and then the journey of how he regained his fortune. I actually listened to him narrate it via an audible download but the book is just as good.
The principles are probably so simple you’ll think “that cannot work” but it’s precisely that simplicity that makes the system fiendishly effective.
Simply put; you look at your inflow of cash, then assign a percentage of profit, all your taxes, and wages into separate bank accounts, and then operate your business from whatever is left over. You cut your cloth accordingly and do not overspend, the operating bank account is the ONLY cash you should use to run your business, failing to do that means you are running your business on the money you owe to other people and have no profit.
Believe me it is painful, the cost cutting, the reality check and the ensuing reshuffling is a wake up call BUT I’ve now introduced it to several business owners and they all say the same thing “thank you!”…
If you listen to the book, Mike comes across as personable and very likeable, a man who has truly “been there” and “done that”, there’s a small section in the book where he recounts having to tell his family they are bust… brought a tear to my eye…
Anyway, if you haven’t read Profit First, have a struggling cashflow and want to find out more here are a couple of links to get started: book and Audible sign up.
It really is a very simple idea, you do not have to be a maths genius or an accounting whizz kid, in fact the system can run alongside any accounting system you have and is so simple to keep track of. A cash flow management system that helps you maintain positive flow and gives you a fallback cash pot in an emergency has to be a desirable position for any business.
Don’t take my word for it, check out the reviews!