Does your business serve you or are you serving your business? This is a question all entrepreneurs should ask themselves.
One of the reasons you started a business was because you didn’t want to be enslaved by your job anymore. But, if you spend all your time trying to just keep your business afloat, how is that different? You traded job slavery for business slavery!
The Profit First Philosophy
But what if your business, instead of being your master, could become your servant. You could say, “Business, I’m going to need to replace my car in about a year,” and your business could make that happen. That’s the idea behind, the latest book from best-selling author, Mike Michalowicz. Mike is also the author of theToilet Paper Entrepreneur and The Pumpkin Plan.
In a nutshell, the plan works like this:
The Generally Accepted Accounting Principles (called GAAP in the book) say your profits equal revenue minus expenses. The Profit First formula turns GAAP on its head. It says that revenue minus profits leaves you with an amount for expenses.
This works better because of Parkinson’s Law which was first stated in the 1950’s by Cyril N. Parkinson. The law, which is really just an observation, states, “work expands to fill the time available for its completion.” While Parkinson’s Law deals with time, it works similarly for money. The cost of a project will use all the funds allocated for it.
If you are spending all your revenue for the expenses you incur, your profits are simply leftovers. Whatever is leftover becomes your profit and that often is nothing. The business becomes a monster that eats all the revenue and you can’t seem to control it. It controls you.
The Bottom Line’s Philosophy
This works perfectly with our philosophy at the Bottom Line. Our name says it all. We’re a lot more interested in the “bottom line,” what you are able to keep, than the what the “top line,” your gross revenues before expenses are deducted, says your company made. The Profit First philosophy seemed to fit totally with our philosophy.
Because of that, we contacted Mike and his team and became part of the small number of accounting services that are “Profit First Certified.” That means we have gone through the comprehensive training and have mastered the system.
As a Profit First certified accounting service, The Bottom Line can help you develop the habits you need to quickly assure that your company is profitable, meets its obligations, and has the funds available for future growth.
The Bottom Line
The Profit First system of accounting did not change who we are at the Bottom Line. We were already there. It is, however, another tool we can use to serve you and your accounting needs better. We are proud to be a part of Mike Michalowicz’s team and associated with a like-minded organization of reputable business professionals.
