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Why the Standard Definition of Profits Simply Doesn’t Cut It?
Are you a business owner who started their company with plenty of passion, hard work, and big dreams – only to realize that it’s an uphill battle? Truthfully, you’re not alone. Perhaps you’re a part of a larger group of business owners who came into the lawn care and landscaping industry with plenty of passion and a solid work ethic, but is lacking the know-how to maximize profits and reap a fair return on their investment.
What Most Business Owners are Getting Wrong About Profits
According to GAAP, or Generally Accepted Accounting Principles, the proper formula for determining a business’s profit is to take your total revenue, and then subtract your expenses, leaving you with your profit. In other words:
Sales – Expenses = Profit
This formula is widely accepted as the end-all-be-all for calculating profits. While it seems simple, logical, and clear – it is also a lie. The formula, while logically accurate, is not exactly optimal. Furthermore, if you’re struggling to achieve a reasonable profit in your business – then this model is not for you.
This might come as a surprise to you, however, the main drawback of the traditional profit model is that it doesn’t account for human behavior.
Don’t Become Another Statistic
This puts business owners in a perpetual cycle where they struggle to make ends meet as entrepreneurs. In the end, they succumb to the pressure and end up closing their doors. According to the US Bureau of Labor Statistics, a whopping 20% of small businesses close their doors the first year. Once you factor in the costs and the sacrifices associated with opening for business – this is catastrophic!
Did you know that 83% of small businesses live paycheck to paycheck? Let’s change that NOW!
A Smarter Way to Do Business – Put Profit First with the Green Executive Team
Clearly, managing your own business is about evaluating your resources and managing them effectively. Managing your working capital and your profits is just as important as any other resource within your business. Furthermore, achieving a profit that makes it worthwhile for you to keep your doors open requires a calculated, informed approach. How are you currently managing your profits? Is your business creating a profit?
If you’re having a hard time answering these questions, then it’s time to consider the Profit First model. You see, the Profit First model puts the traditional formula for calculating profits on its head – inversing the formula. Hence, under Profit First, the formula is:
Sales – Profit = Expenses
While this may seem like a radical approach upfront, it’s actually the OPTIMAL way to manage your business and your returns. Most business owners focus on managing expenses, with little consideration for profits. But what about managing your profits? As a business owner, you have the right to achieve a fair profit, our system helps you do just that.
Employing the Profit First mentality and ethos puts you in the right mindset for creating greater efficiencies and ensuring smooth operations. The traditional model disregards our own human nature – to its downfall. Whereas, our proven model takes human nature into account and capitalizes upon it to build a business that performs optimally and helps transform an entrepreneur’s life.
Testimonial From Profit First Author Mike Michalowicz
Enter Parkinson’s Law
Parkinson’s Law is a theory that states that the demand for a resource increases the needs to meet the supply of it. Hence, if your organization operates on a $5000 maximum budget to complete a project, your team will most likely end up spending all $5000 to complete your tasks.
The Profit First model alleviates this tendency by setting aside a clear distinction on what resources are absolutely necessary, and what is going to the business owner’s pockets. This challenges employees to find new ways to better manage the company’s resources. In the end, you reap the benefits of a more capable, efficient team…while achieving greater profits.
Profit First Does Not Attempt to Change Your Habits, It Leverages Them
Whether in business or any area of your life, change starts with a reasonable yet effective approach. Attempting to change someone’s core habits and preferences usually results in very poor adherence. Many entrepreneurs try to force themselves to become better at accounting and to become more disciplined in their fiscal management by pure willpower. But just like a muscle, willpower can be drained.
During challenging times, many business owners will revert back to their natural instincts, which are to break their own fiscal rules and spend the money they have. The Profit First principle does not force business owners to change their habits. Instead, Profit First works around your existing habits to circumvent pitfalls. By setting aside your profits in separate accounts ahead of time, you alleviate the temptation to “borrow” funds from yourself. This in turn acts as a positive challenge, forcing business owners to adapt and improve their strategies and management to improve their operations while allowing for regular profit distributions.
Do More with Your Business
Ask yourself, what kind of returns are you reaping from your business? How would your life be if you could even double or triple your profits? It’s time to move beyond the traditional method of calculating profits and employ a smarter approach – the Profit First principle. Our transformational approach puts you in the driver seat of your business. No longer will your business control you, but you will have full control over the output of your business.
It all starts with an idea and proper execution. The Green Executive helps aspiring entrepreneurs to ‘dot their I’s and cross their T’s’ as they learn and employ the Profit First model. Additionally, it’s important to note that the model relies on sound bookkeeping and accounting measures. If you don’t know where your money is going, you will never make an appreciable return at the end of the day.
Fortunately, our professionals are capable of assisting with both Profit First and bookkeeping for a sound financial strategy. Our comprehensive approach covers all of the essentials you need for proper accounting and profits – allowing you to reap more from your business. Download the free ebook today and reach out to the professionals at The Green Executive to master the science of profits!