When I started my business 7 years ago, my business accounting was pretty simple! I shot digital photography and apart from a second shooter, my cost was small. When I started shooting film 4 years ago things started to shift and my accounting became increasingly more complex…and not just because of the cost of film. As my business has grown, so have the costs. Things like networking memberships, monthly software subscriptions, having an office assistant, and utilizing outsourcing services that allow me to keep work/life balance in check. Needless to say, managing my cash flow and making sure I still have money to pay my family afterwards has become an increasingly complex task. And it’s that last line (“make sure I still have money to pay my family”) that is precisely what brings me to today’s topic that I’m passionate to share with you all!
About three months ago I was introduced to the book Profit First at an educational event and my interest was perked. I did not like the title, and I’m going to deal with that first because I find it has negative connotations, especially for someone like me, who is purpose-driven in business first and foremost, and views the monetary reward as secondary (though valuable and necessary for the survival of my family). The book’s main premise is not about how to make as much money as you can, but more so, how to run a business that is healthy and lasting. So if you’re like me and the idea of talking money makes you a little queasy, hopefully I’ve helped you overcome a piece of that as well.
I want to share with you five takeaways (inspired by the reading of Profit First) for running a healthy business:
- Profit is SO important, and it is the mark of a healthy business. Profit is what sustains your business in the rough slumps that all of us have or will face, and it’s what allows us to grow the business without accumulating risky debt. (important note: profit is not what you pay yourself…that is considered an expense, and your profit is above and beyond your business expenses. He goes into detail on what and how the profit should be used and how to calculate percentages for profit, costs, and your own salary in the book, and I definitely recommend checking it out!).
- Make paying yourself a priority. This is my favorite point! By paying yourself first rather than expenses, you are requiring your business to live on a budget in the expense realm and to be thoughtful and strategic about the expenses you are incurring. Are they truly necessary? Are they contributing to the overall experience of your client? If not, why do you have them?
- Living with limitations is a challenge for creative innovation. This is a concept that is tandem with the above. If you have to get something done and only have xyz resources to do it, you will find a way if you are disciplined and determined enough, and you will likely be able to achieve just as much. I love this quote: “the ultimate innovation is to extract more from less-expensive resources” (p. 130).
- Ironically, most of what determines your profitability is what goes on after you make a sale. Meaning, your SYSTEMS. If you don’t have strong systems in place, or, you are using failing systems that are costing you in wasted resources and time, you are cutting your profitability. This point challenged me so much, and pretty much gave me the kick in the pants to get to work on analyzing my current systems and the time+resources I am using to complete tasks.
- Don’t justify expenses if the numbers aren’t matching up. This is a hard truth that hit me in a good way. I care so, so much about the use of my time and pride myself in being able to free up time in my business in order to spend more at home–a really awesome thing with a good motive, right? However, I’m learning to make sure to balance this out with the truth of my numbers. If the numbers aren’t working, it’s only going to be so long before I quit due to burnout (you guys, the responsibility of running a small business, no matter how much you enjoy it, is NOT worth it if you are not being paid adequately for it), or, my business is going to tank.
And some of the best advice I found in this book: START NOW. Do something, right now, to begin pursuing financial health in your business. It doesn’t have to be perfect, the goal is simply to start taking action, and all the small, simple steps you commit to making on a daily basis will reap a huge reward in the long run!