Using Profit First let me buy a vacation home!

A Bookkeeper’s Journey Into Using Profit First

I am a professional bookkeeper who has years of experience working with small and midsize businesses. So, I always felt confident in my ability to manage my own company’s finances with success. And I did manage them just fine. But then I discovered the power of using Profit First, and everything changed for the better. Enormously better.

This case study is my personal version of how using Mike Michalowicz’s Profit First system prepared me to weather a pandemic with stability and joy. Oh, and also a new vacation home.

If you’d like to connect and learn how Profit First can change your business, reach out today. You can be profitable immediately with this system in place, and our Fisher Bookkeeping team can help.

My Early Days of Using Profit First

Since my second month in business, I have been a W2 employee of the company. I paid myself a fair wage and kept all of the Fisher Bookkeeping finances separate from my home finances. Everything was nice and tidy.

I read Michalowicz’s book and swiftly implemented much of the Profit First system by setting up many of the specified bank accounts. I analyzed and calculated the company’s spending and set goals to improve our finances as we moved forward.

And I did it all on my own. Yay, me!

For the first few months, I made many small changes across all areas of my business, continually asking the question, “Is this item, service, or expense worth it?” During these months I:

  • Did a competitive analysis of our pricing
  • Organized and streamlined our bill-paying system to lower costs
  • Analyzed client costs vs. revenue
  • Eliminated unnecessary subscriptions

I can’t stress enough how crucial this initial work is to your Profit First success. It may require a significant shift in your focus, attitude, and priorities as you implement the system. But stick with it. It is critical.

Analyzing your spending is crucial when using Profit First.

I didn’t follow every single piece of the system at first. I kept income and operating expenses in one account but allocated profit and taxes to their own accounts. For the most part, my accounting didn’t look vastly different at this point. 

When tax time came around, I had that cash, along with our CPA’s fee, sitting in its account and ready to do its job. It felt fabulous! And at the same time, the profit account was growing as I continued paying myself the W2 salary. I had a great start.

If you aren’t in a position to hire a Profit First coach, that’s ok. Start right where I did by reading the book and doing what it says the best you can. You’ll lay the foundation and start to see your profits right away.

That Time When I Took Profit First to the Next Level

Profit First 2.0, as I call it, came into my life when I met Renee. She became my first personal Profit First consultant and is now a dedicated Fisher Bookkeeping PF consultant for our clients who want that level of support.

Once Renee came into my life, there was no more “mostly” following Profit First. She had me open all the accounts outlined in Michalowicz’s book and follow the system to the letter. I even included a Cost of Goods Sold account, or COGS, for short. 

I did not give myself a raise via payroll, but I did start gathering funds into the various accounts, including one dedicated to “Owner’s Compensation.”

And here’s the thing. Having these accounts to give my money specific jobs gave me the control over my money that I was seeking. I had control over:

  • My Time
  • Choosing Our Clients
  • Doing Fun Things for the Staff

All of these options are incredibly empowering and freeing. And while I was enjoying this freedom, the savings in the appropriate accounts continued to grow.

A Note About Client Profitability Analysis

Analyzing client profitability helps you streamline your effort and finances.

Let’s take a little detour here to peek into the world of client suitability. As I started using Profit First, one of the shifts I made was to analyze any given client’s cost and whether or not the cost was worth it.

I had always encouraged and sought out contracts with clients I connected with and liked. Spoiler: some clients are not easy to work with.

As I moved further into Profit First for Fisher Bookkeeping, I started bringing client profitability analysis into our staff meetings and giving money a seat at the table. As a team, we discussed the challenges of specific clients relative to the revenue they generated for our firm.

My staff would share information like “this client is not easy” or “this client is a pain.” Often, the descriptions lapsed into more colorful language that showed the depth of a client’s problematic nature. These round table conversations gave me permission to let clients go, no matter the revenue.

We always accomplished this with plenty of notice of a month or more. And we helped the clients transition to a different bookkeeper who was a better fit. This seemingly counter-intuitive move solidified our team’s confidence, and each time it happened, a new client came along who was a great fit for our firm.

I say all of this as a reminder that putting your profit first includes examining your client load. You need to make sure you aren’t taking on every warm body that walks through the door. 

This habit inevitably leads to resentment and burnout. Instead, Profit First permits you to choose clients wisely and reassess when something isn’t quite right.

Enter a Pandemic…and a Vacation Home

Enjoying our vacation home thanks to Profit First allocations.

Let’s return to the story. Business marched forward methodically for a few quarters under Renee’s coaching. Clients came and went. Naturally, there were some ups and downs, as with any company, but mostly business held steady. And the accounts kept growing.

Fast forward to March of 2020 when the world came to a screeching halt due to COVID-19. Overnight, businesses had to close due to a state mandate. Uncertainty was the name of the game, and we weren’t immune.

Several of our clients are restaurants and law firms. When dining establishments and the courts shut down, so did their ability to keep hiring us. Fortunately, we did receive some aid from the PPP and EIDL loans, but within six weeks, our client load began climbing up again.

In June, we were able to turn a profit again. Our accounts are intact, and all bills are current. More billable work is coming through the door for our salaried staff, and our team is settling into this new normal of life under the coronavirus

When July arrived, the profit account held more than $10,000. The Owner’s Comp account, which covers my personal wages, had over $60,000. This is money that my firm can afford to pay the owner because of the Profit First allocations. And even the COGS account had about $10,000 with no bills coming due.

Like many families during this time, we decided to head to the coast for a break from our house. Everyone was a little stir crazy, and some fresh beach air with a change of scenery was the perfect remedy. 

On a whim, we decided to look at beach property and investigate the feasibility of buying a vacation home there. In a whirlwind of events, we got pre-approved, found a property, made an offer, and closed on September 2nd. All because my Profit First accounts had the funds allocated that allowed us to make the down payment. 

And you can do this, too.

In the weeks since then, all of our Profit First account balances have climbed right back up again. We can cover all of the payroll and bills without stress or concern. And we have what we need to pay our taxes and accountant when the time comes. And the profit account is on its way to buying a second vacation home!

Work with a Coach

If this sounds too good to be true, it’s not. This outcome is the result of hard work and diligent adherence to using Profit First in my business. And there’s no reason you can’t enjoy similar results.

When you are ready to take control of your finances, sustainably and profitably, let’s connect. Schedule a time to talk with Renee or me, and you will be on your way to living the Profit First life.

About the Author Barb Fisher

Barb is the CEO of Fisher Bookkeeping, an outsourced bookkeeping consultancy that provides small businesses with a full-service financial department. Her favorite aspect of work is to break down the accounting to meaningful bits, so entrepreneurs can make a powerful difference in their own business. She's also a power lifter (squat: 215, DL: 270).

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