What is Profit First?
It’s your business … shouldn’t your profits come first?
Profit First is a pay yourself first cash flow methodology which ensures that the owner is compensated, that the company has cash reserves to pay taxes, and that the company generates profit that can be used to celebrate the success of the company or to pay down any debt.
Virtual Office Solutions is certified by Profit First Professionals to teach and implement Profit First strategies to businesses. Profit First Professionals is an organization of accountants, bookkeepers and coaches who are dedicated to eradicating entrepreneurial poverty through the Profit First system. The system was developed based off of the book Profit First by Mike Michalowicz.
The Old Way to Make Profit
This is the commonly used formula to calculate profits. It makes logical sense, but fails in practice because most entrepreneurs manage cashflow using bank balance accounting. We make sales, pay our bills, and then—if there’s anything left over—we have our profit.
The problem with this is it leaves profits to be something we’re surprised (or disappointed) about rather than something that we planned for.
Putting Profits First
The formula can be manipulated in a mathematically correct way to prioritize profit. We do this by swapping “Expenses” and “Profits” in the equation.
This simple change reframes how we look at our cash flow and our profits in our businesses.
The Profit First Formula
With the Profit First System, you make your sales and you take your profit FIRST. Then allocate the remaining money to meet your other obligations. This formula capitalizes on Parkinson’s Law, which states that as the availability of a resource increases, the demand for that resource increases at the same rate.
In other words, the more money you bring in, the more money you’ll spend. This law reduces your profits. To guarantee profits from your business, you have to take them first!
“There’s one company out there—Debbie’s company—that will drive the profit in your business. Debbie and the Virtual Office Solutions team have become certified in the Profit First Solution. They work closely with myself and our team members here to not only implement Profit First for all of their clientel, but also themselves. Afterall, shouldn’t you work with a company that’s living by the process that they teach?
If you’re interested in having profit in your business, there’s only one place to look: it’s Virtual Office Solutions.”
Mike Michalowicz, best-selling author of Profit First