There are few common principles in nutrition that have held true for over a century, and no matter how many fad diets and “innovative” pills come onto the market promising incredible results, these principles are what lead to sustainable, healthy lifestyles.
The same is true for business, there is a lot that business owners can learn from the lessons of proper nutrition on how to run their business.
Let’s talk about the four fundamental principles of nutrition and how you can apply them to your business’s accounting to turn it into a musclebound Profit First machine.
Use Small Plates
We humans have a tendency to eat everything that is put in front of us. It’s a holdover from days in our evolutionary past where food was scarce and we needed to consume all the calories we could just to survive. Sadly, this habit also translates to our spending in both business and our personal lives.
If you’re running your business out of your Operating Account, it’s like you have one gigantic plate and the more money on the plate the more likely you’re “eating all of it”.
The first step is to reduce the size of your plate.
When money comes into your main account, you should be dispersing it into different accounts in predetermined percentages. Each account has a different objective: one for profit, one for the owner’s pay, one for taxes, and the last for operating expenses.
When it comes to food, eat the most healthy, nutritious things first then move on to the rest of the plate. Don’t leave the good stuff your body needs to the end when you are already filled up with less nutritious calories.
When it comes to accounting, this means filling your accounts in order of importance. As the Profit First name implies, you should be allocating money to your Profit account first, then your Owner Pay account, then the Tax Account, and whatever’s left to the Expenses account.
No exceptions, move the money and stash it away.
What happens if there isn’t enough money to all your expenses? That doesn’t mean you dip into your other accounts. What that means is your business can’t afford those expenses and you need to eliminate them. This will make your business more healthy than you would believe is possible.
If you have junk food in your house that’s readily accessible you’re going to eat it when you get hungry. That’s a surefire way to ensure you choose less healthy options. Keep the chips and chocolate hidden somewhere or better yet, don’t keep them on hand in your house.
Out of sight, out of mind. The same goes for your business.
Make your Profit account and other accounts hard to access and out of arm’s reach. Make it painful to access the money by restricting access with an accountability mechanism like having to physically speak to someone at the bank so you remove the temptation to “borrow” from yourself.
Enforce a Rhythm
We tend to make poor decisions when we’re hungry, which is why we should control our hunger by eating more regularly. Eating more often will actually result in your consuming fewer calories over the course of a day because it reduces the tendency for you to binge.
For your business, this means controlling when you do your payables. Instead of paying your bills whenever there is money in your account, get into a rhythm of paying on the 10th and 25th of the month. This way you can see how cash accumulates and where the money really goes.
This is a better form of cash flow management.
Following these simple principles is how you set yourself up for success, whether in the realm of nutrition or business.
If you want help implementing the Profit First system in your service business we’d be happy to help! You can connect with us here to find out how we can help you turn your service business into a lean, healthy, cash flowing machine!