Profit First
I underestimated the importance of money management in making a business profitable. I’m not horrible at it, but I’m not great at it either. And I need to be great at it.
How do I get better? I think I have to look at my own behavior and double down on the tactics that work and discontinue the habits that don’t.
One of my tactics that works for me in my personal life is ‘out of sight, out of mind’. How do I get my money out of sight? By giving it to the good ole’ USA! I pay an extra $50 a week in taxes which by the end of the year means I’ll get an extra $2,500 on my tax return. But that’s for my personal income. How do I apply that principle to my business profits?
One of the reasons I’m thinking about this is I was reading a summary of the book Profit First where the author says to take your profits off the table before you pay your expenses. This forces you to run your business on what you can afford today rather than what you hope to be able to afford one day.
This is a big mistake I make. I pour my would be profits into new expenses because I can afford them now. Taking over the building’s water and trash, for example. Or buying food and beverages for the employees. I’m running my business like it’s a giant corporation when it’s just a corner shop.
The way I’ve decided to take the profit off the table is to start paying my brother rent for living in his place. It’s not much, but it’s a good start and it will force me to focus on fixing my margins.
My rent and loan payments are now categorized as profit disbursements to me, which should come out to about 10%. I want to spend 2019 focused on making the business really profitable, by which I mean investable. My goal is not one store or a few stores. It’s dozens of stores. That requires this store to run like a well-oiled profit machine.
This story is part of a series documenting the journey of a Dallas startup called Feather Laundry. For your reference here is the Table of Contents for the series.
Previous Story:
Next Story:
