If you're familiar with Profit First, you know the level of success you have is a result of developing good habits around your money. It’s been shown that our habits each day make up our behaviors. When our habits are in alignment with our goals, their consistent performance is the biggest factor in achieving those goals. As with most things, practice is the key to creating a true habit.
Evaluate Your Current Habits
As you look for ways to navigate these uncertain times, I know you'll be looking at your cash flow, as well you should be. But don't stop there. There's never a bad time to begin a good behavior, and this may just be the best time for you to evaluate all of your money-related behaviors and change your habits.
Be Honest with Yourself
Are your daily behaviors setting you up to meet your goal? This is one of the reasons I find Profit First to be so helpful. With all the uncertainty in business, and I don't mean just in these times, a consistent approach to money management makes it a habit. I don’t have to think about what to do daily because I've spent time developing a strategy. Now I simply execute that strategy. Here's how I did it.
Perform a Profit Assessment
I created my strategy by first performing a Profit Assessment. I developed the allocation percentages that set my baseline and gave me the Target Allocation Percentages that I use during the quarter. Now the rhythm around how I manage my money in my business is consistent and is handled every two weeks. This doesn’t take a lot of time because I made the decisions when I first completed my Profit Assessment. It becomes a 15-minute task, at most.
The allocations from incoming funds into the unique bank accounts basically sets my spending levels. Setting aside my profits, paying myself and reserving funds for taxes, are all habits that make managing my personal and family life easier. Taking a quarterly distribution from my Profit Account gives me a reason to celebrate my efforts in my business. It rewards me and my family for some of the entrepreneurial obsession that we all experience that takes us away from family at times.
Live Within Your Means
The allocation dollars to Operating Expenses sets my budget, and I live within my means. Sure, that can get difficult each period, but it puts some boundaries around my business that lets me know almost immediately when the money coming in or going out is not in alignment. Dealing with these issues early puts me in the driver's seat to resolve the issue while it’s still a minor one.
Create a Framework for Habits with Profit First
Managing money is never simple. Profit First is a simple system and it won’t resolve all the money issues. It will, however, put a framework of good habits around your money that make your attention to it more deliberate and consistent. And with these early warning bells in place, it ensures that your habits are setting you up for success, even as the business climate changes, which it does, often.
If your ecommerce business isn’t where you’d like it to be in terms of profitability, check out my book, Profit First for Ecommerce Sellers. It answers important questions about how to implement Profit First in an ecommerce business. Take control of your money and your business, and put Profit First to work for you!
You can also sign up for the Profit First for Ecommerce Sellers Online Course. As a Mastery Level, Certified Profit First Professional, I will teach you why Profit First works so well for ecommerce businesses and the challenges for businesses that have physical products requiring inventory management. You will learn how your behavior drives your money management habits for your business and how you can set up your business bank accounts to work with your habits.