Episode Transcript
[00:00:00] Hi everyone, this is Stephen Edwards from Grow Profit First Accountant. So welcome to the launching episode of the Profit first podcast. If you're reading this on our Profit First Club newsletter, we're having a slight rebrand because we're going to kind of double up as a podcast as well as a newsletter for 2025. Because some people like to read, some people like to listen, some people like to watch videos. And what's going to change? What does it mean for you guys? So the main thing is I want to add more value.
[00:00:35] How am I going to add more value? Well, we are Profit first accountants in the UK. Previously I've been voted to the UK's number one profit first accountant. And we get that recognition by working with real business owners like yourselves. So it's not just me talking waffling every week and kind of making episode go along. We work with clients, you know, one to one group settings. So we've got lots of real life stories. And rather than you guys having to pay us money to work with us one to one, I'm going to share lots of the tips and tricks. What worked for other people, the before, the after. How did we kind of bridge the gap in terms of people's profitability? Because I think that's why we're all listening. We're all listening because ultimately, you know, we want to make more money and I, and I don't think we should be scared to say it's not a bad thing to want to make more money. You know, if your employees want to earn more money, it's not a bad thing because what does money mean when money is basically a sign of value, it means you're creating more value. If you're, there's more profit in your business business, there's more value creation so you're doing more for your customers. What's left is the profit. And actually I think that's a really interesting topic topic in itself for another day. If you've got little profit, maybe you've got little value or you as the owner's taking too much value out of the the business. So we're going to share more practical kind of stories from the people we've worked with. Probably get some gu best people to invite them on the podcast to share their journey with Profit first because it's hugely popular, it's grown in the uk. A lot of people I come across in mastermind groups, coaching groups, workshops, online communities, know what Profit first is in some shape or form. So it's getting more popular and we get some people onto the podcast in future episodes. So let me just give you a little bit of a recap.
[00:02:32] Why is profit first important?
[00:02:35] I'm just making sure.
[00:02:38] Yeah, I was making sure it was recording. This is the first episode.
[00:02:42] So why is profit first important? So if you are watching or listening to this and you don't know what profit first is, the first thing I will say is to read the book. You've got two options. It depends how you like to consume things. A lot of people like to listen to stuff nowadays, so you can listen to the audiobook or you can read it. Mike Michalowicz, the author from America, really engaging writer and speaker. So either way, I think you find it really useful. The other thing you can do is if you Google Profit first talk Profit first presentation, you will find often there's a couple of talks on YouTube about an hour, hour and 20 minutes long with Mike doing a presentation to a group of people. And that's what he does in his big keynote events. I've watched one in Birmingham over a year ago at the ICC and he shares his story. So if you want to get up to speed, I would probably start there. However, I'm going to give you a recap. It won't be as good as what Mike will tell you because he's the guy who come up with the concept. He wrote the book, it's his story. But I'm super passionate about it and there's lots of other people that are. So essentially, if you're, if you've been running a business for some time, so at least two years, probably longer, I imagine, if you're listening to this, if you're new, you know, stay with me because it's going to save you a lot of pain, pain and heartache later on. But if you've been growing a business, running a business, you're, you're, you've probably been in the trap where you've been chasing turnover, you've been chasing revenue, you've been chasing sales. They're all kind of the same thing, really. You've been chasing the top line rather than the bottom line. And at the beginning, we wear this as a kind of badge of honor. You know, this is what our revenue is. This is how many staff I've got. Moving to a new office is something that we, you know, we, we feel proud about moving to bigger office. I've kind of done all those things. I've, you know, I've talked about all these different things. But what happens over time is we think our turnover is Just going to keep on going up and our costs will go up and go along with the turnover. But when the turnover plateaus, which it probably has done for a lot of people in the last year or so, particularly the last year, but post Covid, it's not easy to get rid of those costs. We're loaded up with these costs, these extra costs, because we, we, you know, we're doing it in the. With the excuse of growing, I'm investing in my business, I'm going to grow my business. But you're not actually growing your profit a lot of the time that actually many people I've seen, their business is 10 times bigger now than what it was and they've got less profit than what they had previously. So that's kind of what profit first tries to solve. It's not about turnover. You know, turnover is vanity, profit, sanity. It's all about the bottom line. So we reverse engineer everything. What comes first matters. So with traditional accounting, it's sales minus expenses equals profit equals what's left, what's remaining. So profit comes last. With profit first, it's sales minus profit is what we've got left to run our business. And you might be thinking, if you're new to this, oh, my God, how would that work? I know what my costs are. I've tried to reduce all of my costs. Don't worry about all that right now. I just want to share the kind of. The thinking, the philosophy.
[00:06:04] So what comes first matters. If we take our profit out first, we are going to reward ourselves just by default, as owners, more than we have done previously. And what that means is you've got to get innovative, you've got to be resourceful, you've got to be prudent with the money you've got left. And if you've been running a business for a few years, you've. You probably pinch, you know, with penny pinching at the beginning, you were more resourceful at the beginning because you didn't have as much turnover. So you had to be more resourceful, you had to be more innovative. You couldn't just throw money at the problem and hire that team member and get loads of people to do stuff for you. Although I'm a big believer in who, not how. You know, props to Dan Sullivan for that concept and, and that book, but in the beginning you can't do that. And the problem is when you grow your revenue is you lose that kind of resourceful thinking we have when we're a startup. So with profit first, we want to get that back. We want that hunger, that innovation, and ultimately we want you to pay you more than you've ever paid yourself. So one of the things profit first taps into is something we call Parkinson's Law. So Parkinson's Law is essentially the more the supply is available, the more the demand there will be for it. So, you know, a recent example I've gave people is at Christmas, do you tend to eat more food or less food?
[00:07:26] Probably more food, you know, if you're a normal person. And why is that? Because there's more supply of food, so the demand increases. And I know there's some, you know, classic economics in terms of supply and demand and all the rest of it, but you know, some real world examples when we think we've got more or something, we consume more because we're in an abundant mindset and which is a great mindset to be in in terms of positive thinking for your business. But it's dangerous when you think your money's not going to run out. So if, if we relate that to business, you, you know, rather than having all of your money in one pot. So let's pretend you had £50,000 in your bank account. You might think that's a lot of money when you log in. However, if £20,000 was your VAT bill, £20,000 was your tax bill, and then you've got £10,000 left to pay all your materials and all your wages. That's a completely different scenario. Looking at 10,000 versus looking at 50,000, it's five times less. So we create this system where all of your money goes into pots and you, you know, out of sight, out of mind, you're forced to run your business on less money. So we make sure we have a pot to pay yourself, we make sure we have a pot for your vat, we make sure we have a pot for your tax, we make sure you have a pot for an extra profit, pot for a rainy day, we make sure we have a pot for your operating expenses. If you've got lots of materials and equipment and stock, we have a pot for that. So essentially there's a pot for everything. And what you're left with to truly run your business, your overheads, is a lot less. It makes you more prudent, resourceful. You know, some of the reservations, some of the concerns around Profit first is does it tap into a scarcity mindset? Because we, you know, we're thinking there's not enough to go around. That's absolutely not the case. You know, I love an abundance in mindset I'm always thinking bigger, I'm always thinking 10 times bigger in my, in my business. And you can still have an abundant mindset. However, we don't just want to throw money at the problem. That's the key difference. We want. We want to be creative and innovative and. Yeah, so that's kind of it in a nutshell. And it works. It's worked with tens and. Tens and tens of thousands of businesses, probably about 5, 600,000 businesses in the world. It's. It's been more popular in America, but it used to be kind of one America's best kept secrets. But it's a lot more popular in the UK in the last few years because it works. Yeah. So that's what Profit first is. And why is this important to me? Why is this important to you? Because if you keep on doing the same thing, you're going to get the same results. If you struggle with your finances, you struggle paying your vat, you struggle paying your tax, you struggle paying your wages, you honestly believe you don't pay yourself enough, you feel you should be more successful in monetary terms. And I know there's the whole work life balance thing to take into account, then Profit first might be something that can help you. It probably will be something that can help you. And it's a blueprint that works. And the truth is, eight out of 10 business owners you see on the streets or you meet in these groups, these communities, obviously depends in the room you're in. But by and large, across the UK, 80% of business owners are struggling in some shape or form. So, you know, there must be a better way to do it. And that's why we're so passionate about Profit first, because it works. We implemented it in our own business around five, six years ago and we seen a 70% increase in our profit within two, two and a half years. So we made more profit than we've ever made and our turnover went up, but it didn't go up in the same proportion. So essentially we kept more of every single pound that come into the bank. So we just kept more of that money because what it does is it forces you to be more creative, as I, you know, as I've suggested a few times.
[00:11:20] Yeah. So, you know, one of the big challenges I find with business owners is that we kind of bury the finances to the back of our mind. You know, we can argue to ourselves that we're not accountants, we're not bookkeepers, we're not financial advisors. Oh, numbers is not my thing. I don't know numbers. I don't really know what the accountant does and what happens because you're, you know, putting your head in the sand a little, a little bit. To be honest, Most business owners is we wake up in the middle of the night worrying about the finances, that lack of clarity, how am I going to pay the wages, how am I going to pay the vat? And why I'm so passionate about profit first is it solves that problem. You know, the money is there. So that's in a nutshell.
[00:12:03] But as I said, read the book, listen to the book or look for the presentation on, on YouTube. Okay. So some of the other topics I, I want to talk about is first, I want to say profit first is not just for small businesses. This problem around the lack of profitability affects businesses all shapes and sizes. I met a business owner last year that's turning over £8 million in their business and they're making less than 100k in profit.
[00:12:34] 100k in profit might seem like a lot of money to a lot of people, but I can assure you for an 8 million pound business, that is not enough profit.
