Without a doubt, the best way to prepare for the future is to plan for the future. And when it comes to your business, planning means having cash available for future operations, challenges and opportunities.
When you own your own business, you own your future. No one else is going to help you with that. You need your own financing, your own expansion plan, your own retirement plan. You need your own money. Yes, I can hear the objections, you have a line of credit, you have a bank loan, you have investors…. But guess what? Each of those accounts will want their money back at some point. With interest. Ultimately, all cash responsibilities weigh on your shoulders. And often your personal credit rating!
And so you may say to yourself, “How do I do that? All my cash is tied up in operations and I have debt payments to service. Doesn’t saving have to wait? Isn’t that the sacrifice of starting or growing a business?”
Is this what you are thinking? These are good questions because they recognize that something needs to be done. Action needs to be taken.
Having cash in the future means not spending it now. And the easiest way to achieve that is to put it out of sight. Starting small is the key to success. As a Profit First Professional, I know firsthand how big things can be achieved by starting with small habits. Where to begin? I am so glad you asked!
Step One is to open a new bank account and call it “PROFIT”. That’s a word we can all relate to. For me, it spells of achievement. For you, it may represent success, security or a pat on the back for a job well done. Universally, I think we all accept that PROFIT is an important objective of our business, but if that word doesn’t put a smile on your face, give it a name to reflect your own personality…. FREEDOM, FUTURE, RELAX…. this options are endless. Being profitable is synonymous with having enough cash to pay yourself, your bills, your governmment tax obligations AND having funds set aside so that you never worry about having enough for rent, payroll or unexpected closures such as a global pandemic!
Now that we have agreed that Profit is our objective. That’s the easy part. How do we get there?
We get there by starting. Taking a step. Then taking another. Again and again and again. At first, it may be feel like you may never achieve your Profit Objectives, but don’t be discouraged. Along the way, we will reward ourselves and build our positive momentum. If we have debt, we will DESTROY it in a calculated and methodical way. And we will celebrate as we go along.
Step One is to open a Profit Account with your bank. If possible, we want that to be an interest earning savings account, but not all banks will allow this. Talk to your account manager and get this account opened today. Be sure that you are able to transfer funds to it directly from your existing operating account at no cost.
Step Two has some flexibility and if you are unsure where to start with this task, I invite you to book a free 15-minute call with me to help you decide how much and how often you will tranfer funds to this new Profit account.
Traditionally, the recommendation is to make transfers twice each month based on a percentage of the deposits you make to your operating account. In reality, the timing and percentages can vary dramatically from business to business and in this case, one size definitely does not fit all. What is important is to set the schedule (book it in your calendar!) so that it becomes a habit. The amount will grow over time as we tackle some of the other issues holding your cash flow back.
Step Three is easy to do and because of that, many people fail to complete this step. Step Three is to ACTUALLY transfer the funds from your operating account to your Profit account. It can also be quite scary to do the first few times as we can get very nervous that moving this money means that we won’t have enough for our business expenses. But if we have started small, this should not be an issue. So take a deep breath and make the transfer. There. Didn’t that feel good? You have taken your first step in saving for your future!
Steps Four, Five and Six are to repeat Step Three. Make this a habit! I was surprised at how quickly this became a habit. For me, it was the end of the second month where I remember waking up one morning and thinking, “Hey!! I have to transfer my Profit today!!” The amount in the account was quite small, but I remember smiling to myself and thinking, “Wow. I am really doing this. It’s working and instead of feeling stress about setting money aside, I am feeling invigorated… Energized even!” This is the momentum I mentioned earlier. The habit begins to form and the reward is watching the bank account grow. This reinforces the habit. A powerful circle of achievement!
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