Episode Transcript
[00:00:01] Hi, guys, and welcome to this week's Profit First Club podcast.
[00:00:05] So I want to talk about something that really resonates with me as a business owner. Yes, we love Profit First. We love the book, we love Mike Michalowicz, we love the system. However, if you've been following the podcast for some time now and reading the newsletters, what we're really passionate about is helping you build your, your dream business so you can live your dream life. And that might sound wishy washy to some people, but I promise you, it's what gets me out of bed. It's why we exist as an accountancy practice. It's why we love Profit first is Profit first helps the owners build a business that gives them the life they deserve. And when we start a business, we normally do it for two reasons. We want more time, freedom and more money. Freedom.
[00:00:52] But the truth is you end up with getting neither of those things. And if you read my book, how to Build a Business that Runs without you, we get stuck in a trap in our business. Most business owners, even when they're turning over millions of pounds, are still kind of struggling with cash. They're still not really paying themselves what they deserve as a business owner. And when we account for the time we work in the business and what we actually pay ourselves, it's generally a fraction of what does your dream life look like and what does your dream business look like. But it all starts with the intention. And I'm going to share a story with you in a minute about a new person I've been coaching. He's got a business that's fairly successful, few hundred thousand pounds worth of revenue, but he's paying himself a decent amount. But it's far off what his ideal lifestyle looks like.
[00:01:44] And I've helped, through some financial modeling, help him identify how he can make some fairly simple changes. Not easy, but simple changes that can transform his business now and give him the life that he wants. So I asked this person, how much do you want to earn per annum to do everything you want in your life? And I encourage you to do the same. If I was coaching you, if I was helping you personally, I'd say, well, what does your ideal life look like? And I'd want you to get a spreadsheet or piece of paper and cost it up. How much is it going to cost you for your mortgage, your house? How much is it going to cost you for your holidays? Putting money aside for your pension? And when we're talking about earning more money, it's so we can enjoy life. We've only got one life, so we can have abundant lifestyle and do all the things we want to do and also help our family. You know, it's not greedy to put money aside for your pension. It's not greedy to help your family get their first house.
[00:02:39] It's not greedy to take your family on the holiday and create amazing memories. I want you to cost it up and figure out what does that income look like, how much profit do you need? And forget about the tax, just what does that actual physical cash figure look like. And then what we do is we reverse engineer what does the business need to do to generate that amount of income for you personally? And in this particular business we needed to pretty much double the, double the profit in the business before we even think about the tax.
[00:03:11] And we went through and most people, they get stuck in the way they've always done things and they think that's the only way they can do it. And this is the problem with having no other business owners to speak to. No one in your team. Cuz small businesses, we don't have a boardroom, we don't have all these advisors, we don't have a finance director, a marketing director.
[00:03:30] Different people, you know, in different seats. It's generally us. We generally got small team and the owners carrying all of this burden. So we don't know what we don't know. But what if you were to start your business again? What if you'd have a completely different model in your business instead of building that extension on an extension and kind of just, you know, building on what you've already got. What if you started from scratch and, and what, what if you've got a new blueprint for your business and what if you reverse engineered what the profit needs to be? So let's say you're a 300k business and you're currently making £30,000 which is 10% profit.
[00:04:09] With profit first, just think how crazy this seems for a minute. With profit first we're saying that profit minus, sorry, sales minus profit equals what you can afford to run your on your expenses.
[00:04:23] So with this particular 300k business, we've got £270,000 worth of expenses. That's 90% expenses, which is not untypical. When we work with lots of people, it's not uncommon to have 85% of expenses of the real revenue and that leaves them with £30,000. But what if we said you wanted £90,000 profit from that business?
[00:04:47] So with profit first we say £300,000 minus the £90,000 gives you £210,000 to run your business.
[00:04:57] Do you think emotionally, intuitively, that it feels realistic, it feels sensible to run a 300k revenue business on £210,000?
[00:05:10] The answer is probably yes.
[00:05:12] And if the answer is no, it means you're in a business where you're squeezed. It's really competitive. I call it a red ocean. All the competitors are Sharps, all competing for the same customers. You know, a lot of Amazon businesses are like that. But let's say you are currently making £30,000 and in this case, the person I was coaching, and I won't give you the real numbers, but let's say it's not far off. They're going, they want to go from 30 to 90.
[00:05:37] And the instinct is, I can't do that, I can't possibly do that. But because we've done some new financial modeling, we look to the numbers and, and we said, what if? So financial modeling, if you're, if you're new to what that means, is essentially reverse engineering the figures and changing the numbers and changing the relationship of what if I do this, what if I do that? What will the numbers look like? What if my percent, my net profit needs to be 20%, how does it impact all of the other numbers? And it's quite a fun thing to do because you kind of get your paintbrush out and it's kind of creative accounting, but it's doing it in a way with what could my business look like? And that's the question I asked as business owner. What if, could you do this, could you do that? And the truth is, most of the time we can. You know, man is, is, is flew a rocket to the moon.
[00:06:25] We've done amazing things. You know, we've, we've put machinery sort of droids on, on, on Mars. We've done some absolutely extraordinary things. So could you make some simple changes in your business to increase your profit? Is the question I ask you. So when we went through and we looked at these changes, the profit went up by a hundred percent, the profit doubled, and all of the changes I identified were possible.
[00:06:55] So it's not. We're not just talking about cutting expenses, we're talking about running your business a slightly different way. If you do the same thing you've always done, you're going to get the same results. And what it comes down to is asking better questions. And when you're in your business on your own, no one's asking you these powerful questions.
[00:07:16] Often we don't get the Answers because we're not asking the right question.
[00:07:23] And what profit first forces you to do is ask better questions. How can I do this? What needs to be true for this to happen?
[00:07:32] But it all starts with what do you want to earn personally in your business for you and your family, what does your ideal life look like? And I want you to really visualize that lifestyle. I want you, if you've been in business for a few years, you might have fallen out with the love and the romance of the dream. I want you to fall in love with the dream. What could it look like for you? What sort of holidays do you go on? Where do you live when you get out of bed? What do you do in the morning?
[00:07:57] I want you to start with your ideal lifestyle, and I want you to put a number on it. I want you to add it up literally on a spreadsheet or piece of paper. And then I want you to figure out, how could your business give you that amount of profit? And the truth is, if you. It all starts with not. Don't get stuck on, is it possible?
[00:08:17] Or I need to figure out a plan straight away. I just want you to visualize it. Because if you don't visualize it, nothing's going to happen. I promise you. Everything starts with the intention.
[00:08:26] And if you get stuck on the plan, that is where profit first comes in.
[00:08:31] Because it's not a magic wand.
[00:08:34] All of the changes don't happen overnight. It's a process, it's a journey. But it all starts with where are you starting from and where do you want to get to go? And that's what we do with people.
[00:08:45] We create a roadmap. We create a roadmap of, this is where you are, we put your business on the scales, this is where you are.
[00:08:52] Then we help you get to where you want to go. But you need to know where you want to go. Yes, we can help you get to where we want to go. But you need to truly think about where do you want to get? Where do you want to get to in your business? If you go to the gym and get a personal trainer, the first question is, what are your goals? What are you trying to achieve? You know, what does your ideal physique look like? And we do the same with your business.
[00:09:15] So the big takeaway, guys, I want you to go and I want you to think about, what if I had a different business model? What if I started again? What if I'd done things differently?
[00:09:23] And I promise you, if you think about this often enough and you Put the effort in by thinking about it often enough. If you put an appointment in your calendar and said, I'm going to spend 20 minutes a week to think about this, increase my profit by X or whatever it is for you, you are far more likely. You're 10 times more likely to make it happen.
[00:09:43] And you're 50 times more likely to make it happen if you get someone to hold you accountable.
[00:09:48] And also someone who's got a plan, a strategy, a roadmap. And they've been there and done that. But the starting point is just to think about it. What does your ideal life look like?
[00:09:58] And what does your ideal business look like? And what profit figure are you aiming for? And often you don't need to double your business to double your profit. Hopefully that's useful, guys, by all means, reach out to me if you've got any questions. If you're not a client, you want to learn more about Profit first, how we help people find. Feel free to reach out. Always happy to have a chat. Our mission is to help people build a better business so they can live a better life. If you're a client of ours and you're not currently implementing Profit first, we've got some exciting news. We're about to help more people.
[00:10:30] It's kind of we, we can't help everybody at once. We've helped over a dozen people on a one to one basis, probably around two dozen now. And we've had some huge success stories. We've seen people double their profit, triple, triple, triple their profit. We've seen people go from one business to do two businesses. We've seen them work less hours while increasing their profit. Some people just celebrating the fact they can pay their paye, they can pay their VAT and they've got that peace of mind. They've got 10k, 20k set aside in a rainy day bank account that they've never had. We've had lots of people. We're going to help more people in 2025, so watch this space. We're really excited to help our clients. If you're not a client. We don't work with everybody. We only take on around four clients a month. You need to be a good fit for us. You need to be quite ambitious, entrepreneurial, you need to. More importantly, you need to have an abundant mindset. You want to grow something, you might want to grow your personal income, you want to grow your business or you want to grow your freedom in your business.
[00:11:30] We also do tax planning because it all links in to giving you the kind of life that you want. But if you feel that this resonates with you and you could be a good fit, by all means, reach out. More than happy to have a chat and have a great week, guys.
