326 - Creating your profit plan
On today's episode of the podcast I'm sharing how to build a profit plan designed for your business.
If you haven't already, take our quiz to help determine your best starting point on your legal and tax journey. Head to notavglaw.com/quiz to get your results.
When I started my business I was operating with a sub-500 credit score and I didn't have the greatest habits with money (still don't always, but I have the knowledge and know-how).I was in a cycle of churn and burn that was further exacerbated when I started making more money in the business. I'm not going to tell you that making more money doesn't help, but if you're not managing it well, what happens is you start spending more money on more expenses. That's why it's really important to stay off the "WTF happened to my money?" hamster wheel and get your profit sorted out sooner rather than later.
When I was going through this journey I read Profit First and lots of other finance books to piece everything together. During this process I created my Unf*ck Your Biz course and wrote the first edition of my Unf*ck Your Biz book. Fast forward a few years and now we're running Unf*ck Your Biz as a signature 1-on-1 service and I'm seeing more than ever how much of a sticky issue cash flow is for people because no one teaches us these things. How do you pay yourself? Do I need a business bank account? Can I pay a business expense from my personal bank account? What if I'm an LLC instead of a sole proprietor? The list of questions goes on and on.
I get asked a lot about Profit First and while I may be jealous of the brand recognition, I can't hate on the book too much because it has done a fabulous job of getting people to understand the importance of profit and to pay themselves first. It also gives a simple to follow system.
The big thing Profit First has you do is open five bank accounts. I did this at one point in time and despite setting it up properly, it wasn't set up right with the bank on the back end and I was getting fined zero balance fees for zero-ing out the accounts as you're supposed to do with the Profit First method. I also found many people going through Profit First only end up implementing about half the system anyway.
My biggest issue with Profit First is that while it helps with cash flow issues, it doesn't teach what you're required to do in terms of paying yourself or tax nuances based on tax and business structure. I understand why it doesn't from a legal perspective. As a tax attorney, I'm able to dive into cash flow in my book, which is a big piece of unf*cking your biz, but also dig into the nitty gritty that comes with it. If you're curious about how you should be doing all this, that's what I dive into in Profit Rx. The Profit Rx course dives into parts one, two and six of our Unf*ck Your Biz framework which is covered in the book. You can also work with us to implement the full framework 1-on-1, you can DIY it and use the book, if you just want the legal bits of the framework you can buy our Legally Launched course and if you want the tax, bookkeeping and money aspects you can buy our Profit Rx course.
To give you a highlight of what's included in the book and what you can get in Profit Rx, let's look at an excerpt from the book in Chapter 18.
I hate the word "budget." Ick. But creating a bucket system is like budgeting for non-budgeters.
By separating your money into different buckets, you’re creating a budget for each category without sitting down and saying, “I’ll spend X on groceries this month, Y on eating out, etc.” Instead, your balance in any given account is your cap for spending on that category to make it easy.
The basic system looks like:
1. Set up a business bank account - If you have a sole proprietorship, you’re not legally required to have a separate bank account. If you have an LLC, or any other formal legal entity, maintaining a separate bank account is one of your corporate formalities and is required.
2. Dial in the profit
3. Automate your taxes - Inside Profit Rx I teach you how to calculate your quarterly tax percentage and therefore how much you should save for taxes.
4. Pay yourself - Once your tax savings are automatically taken out. I recommend that twice per month you transfer a set amount of funds from your business account to your personal account. This prioritizes your profit. After you transfer your profit, the balance remaining in your account is your allotment for expenses. If you want to take on a new business expense, you must have the funds in the biz account. In the book I dive more into detail like how to add in sales tax savings, how to adjust cash flow in a partnership, how to adjust cash flow with an S Corp, and more.
To learn more about this whole process you can:
- Buy the Unf*ck Your Biz Book: notavglaw.com/book
- Join Profit Rx: Get all the lesson videos, guides and templates: notavglaw.com/profit-rx
- Take the quiz if you're curious where to start: notavglaw.com/quiz
The main takeaways I want you to have from today's podcast is to separate your business and personal finances, start saving for taxes and start focusing on profitability and start paying yourself.
