Finally, a Profit First Book summary for crafters. Now let’s take the thought process that sales – expenses equal profit and toss it out the window.
In this blog post, I want to tell you about an approach to managing your small business finances that is going to blow your mind. Imagine transforming your business from a cash-eating monster into a thriving, money-making machine. Where financial stability isn’t just a dream but a tangible reality.
The Profit First Book Summery: A Crafters Overview
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Profit First isn’t just about keeping your head above water, but a way to work towards financial freedom and success.
The Profit First method has been a game-changer in my business.
Profit first turns traditional business accounting methods on their head, and creates a new normal where profit isn’t an afterthought—it’s the main event.
The Profit-first book shows that when you take care of your profit first, you get smarter about what you spend on other things.
Profit First Book Summery: For Crafters
Author Mike Michalowicz, in his Wall Street Journal bestselling book Profit First, introduces this alternate accounting system with real-life examples and a clear, intuitive way of managing finances. He argues that by adopting the Profit First method, you transform your business from a cash-eating monster into a profitable cash cow.
Michalowicz’s argument is built on the core principles of Profit First, which makes you focus on profit from the get-go to ensure the bottom line isn’t just an afterthought but the main goal.
This way, your business scales in a way, that is always making sure you have enough for what your business needs, as well as making sure you are personally profiting too!
Implementing the Profit First method means taking the next step towards financial freedom and stability for your own business. It’s a shift from the traditional principles where sales minus expenses equals profit, to a system where sales minus profit equals expenses.
This simple yet revolutionary shift can turn any small business into a profitable entity. Ensuring consistent incoming cash flow and a solid foundation for growth.
Understanding Profit First
For small business owners, creating a profitable business often means navigating through unsustainability, especially when there seems not to be enough money. But the profit-first system lifeline not only helps keep your business afloat but also makes sure it thrives.
The Profit First approach is a simple method that helps you tackle financial instability by separating your small business income and expenses into different accounts. By doing this, it allows you to see exactly where your money is going and how your business is REALLY doing. It’s about making every dollar count and setting the stage for your small business to grow into a profitable powerhouse.
Profit First is a mindset that challenges the traditional formula of sales minus expenses equals profit. Instead, it flips the equation, encouraging you to prioritize profit by taking it out first and then allocating the remaining.
This shift in perspective ensures that profitability is at the forefront of your business strategy, rather than an afterthought. By focusing on profit first, you’ll make smarter financial decisions, improve your financial health, and promote sustainable growth.
Setting Up Your Profit First System
To implement Profit First, you’ll need to set up different bank accounts that correspond to specific financial goals. Don’t worry; it’s not as complicated as it sounds! Consider using Relay is the official banking platform for Profit First, which offers up to 20 checking accounts with no fees or minimums.
These accounts, such as the profit account, owner’s pay account, taxes account, and operating expenses account, will help you manage your finances by clearly separating funds for different purposes. With this system in place, you’ll have a clear overview of your business’s financial standing and ensure that important items like taxes and your own pay are never overlooked.
With the Profit First formula, focusing on profit margins is the most important part. By allocating much money to profit right from the start, you’re essentially putting a spotlight on your profit margins, ensuring they’re always in the green. This approach flips the script on traditional money management, where money problems often arise from not paying enough attention to profit.
With Profit First, you’re constantly aware of how much money you’re setting aside for profit, making it easier to identify and solve financial issues before they become big problems. It’s like having a secret weapon in your business arsenal that keeps your finances in check and your profit margins healthy.
Allocating Your Funds
Every time your business makes money, it’s crucial to split it up based on predetermined percentages. This split will help you manage your money wisely and ensure that you have enough funds for materials, tools, and your own paycheck.
By automating these transfers using Relay Financial or a similar platform, you’ll eliminate the need for complex calculations and ensure that your finances are consistently allocated according to your profit-first mindset.
Profit allocation in the Profit First system is pretty equivalent to dividing a cake into slices in a way that makes sure the whole party gets a slice.
So instead of eating first and giving out what’s left, you decide how big each slice will be ahead of time. In your business, this means deciding how much of the money you make (the pie) will go into different slices (accounts) for things like operating expenses, taxes, and most importantly, your profit.
The Benefits of Profit First
Implementing Profit First offers numerous benefits for your craft business.
- Firstly, it provides cash flow clarity, allowing you to understand where your money is going and make informed financial decisions.
- Secondly, it promotes permanent profitability by ensuring that profit is not an afterthought but a priority from the start.
- Finally, Profit First encourages sustainable growth by prompting you to invest in areas that contribute to your business’s long-term success.
With Profit First, you’ll transform your craft business from surviving paycheck to paycheck to thriving and building a stable future.
Relay Financial: Your Profit First Partner
Relay Financial is the perfect partner for your Profit First journey. As an online banking platform, it offers convenience, flexibility, and a user-friendly interface. With Relay, you can easily set up and manage your multiple accounts, automate transfers, track expenses, collaborate with advisors, and streamline your accounts payable.
It’s like having a friend that keeps your business banking enjoyable and stress-free. Whether you choose Relay or another bank, finding a system that works for your business finances is essential for growth and success.
Relay is a financial technology company, not a bank. Banking services and FDIC insurance are provided through Thread Bank, Member FDIC. The Relay Visa® Debit Card is issued by Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa® debit cards are accepted.
*The interest rates and annual percentage yield on your account are accurate as of 05/16/23 and are variable and subject to change based on the target range of the Federal Funds rate. APY will vary between 1-3% depending on the balances held. Earn 1% APY on savings balances of less than $50,000, 1.5% APY on savings between $50,000 and $250,000, 2% APY on savings balances between $250,000 and $1,000,000 and 3% APY on savings balances of more than $1,000,000. There are no minimum balances or minimum deposits required to earn interest on your account.
Taking the Next Steps
This Profit First book summary is more than just a set of financial strategies; it’s a new way to manage finances for small to large businesses.
By embracing the primary banking concept, using percentages Michalowicz recommends for allocation, and setting up a new checking account for your business, you align every aspect of your business with the goal of achieving better results.
This is not just about making more money; it’s about creating a sustainable, profitable framework that ensures your business thrives.
To further explore Profit First and gain a deeper understanding of its principles, I recommend grabbing a copy of the book Profit First by Mike Michalowicz. This book will provide you with invaluable insights and guidance on implementing Profit First in your craft business.
Additionally, if you’re ready to take action and set up your Profit First system, I’ve included a link to get started with Relay. Remember, it’s free and straightforward to get started, and it will make managing your finances a breeze
Congratulations on taking the steps toward transforming your craft business into a profitable venture with Profit First! By prioritizing profit, automating your finances, and making smarter financial decisions, you’ll set your business up for long-term success and stability.
Embrace the Profit First mindset, and watch your craft business thrive financially while giving you the freedom and fulfillment you deserve. Start your Profit First journey today and take control of your craft business’s financial destiny.
More Amazing Craft Business Posts
Also, if you are looking for more ideas for products in your business make sure to check out 40 Handmade Items That Sell. This blog post is the perfect guide to figuring out exactly what you should sell.
And if you are just starting to figure turning your hobby into a hustle please read How To Start A Craft Business With No Money this post will guide you through the right ways to start with little or no funds.
