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You've probably heard about the Profit First Methodology. With my first blog post, I'm going to give you just a little piece of the puzzle by laying out the basic steps to this revolutionary method. And by revolutionary, I mean - for business. I'm sure back in the day (or even now!), you had a holiday savings account where you put a little money every week or every paycheck into the account and *POOF* by the holidays you had a nice little stash to spend on gifts. This is the same thinking. If you set aside "buckets" or allocations of your revenue each and every month, you will quickly grow your profit accounts and will be able to accurately identify how much you actually have to spend on running your business. Here's how:
Create your buckets, not just in your accounting software but at your bank.
By opening actual accounts at your bank, you will separate your funds in a way that allows you to truly see what you have available. At a minimum, you need PROFIT, TAX, OWNERS COMP and OPERATING accounts.
Start with a small allocation
You want to be able to continue this and not "steal" from the accounts to fund others. So start with even 1%. As a Profit First Coach, I can help you calculate what is ideal for your business.
Reward Yourself with Quarterly Distributions!
You've put the funds aside - now reward yourself for your hard work. Consider it a quarterly bonus. Your business should be working for you, not the other way around. So you need to pay yourself and bonus yourself for work well done.
Allocations can be used for all kinds of projects, profit sharing, charitable donations, etc. Contact dK east for help on how to make that happen!