The Most Profitable Season of the Year?


By Adam Linneman

As business concludes for 2022, there will be companies who post huge profits and others that barely scrape by.  If profit isn’t where you want it to be, perhaps you need to consider a new approach like Profit First from The Green Executive.  Here is a guest blog about their approach and how you can make profit a habit…

Want to have this blog in podcast form?  Check it out here.

Bank Balance Accounting
To start implementing the Profit First method, you need to open up five core bank accounts. These accounts are to be used to allocate: income, profit, owner’s pay, taxes, and operating expenses. The purpose for this is so you don’t have to rely on a P&L statement or a balance sheet on a regular basis. Instead, what you’ll start doing is looking at your bank account balances. And in return, you’ll know the health of the business based on the percentages of money that’s going into those bank accounts (and/or just the total amount of money in general).

Take Your Profit First – ALWAYS!
It’s time to reverse your thinking! It’s no longer Sales – Expenses = Profit. With the Profit First method you are implementing Sales – Profit = Expenses. This methodology allows you to focus on what comes first. Because as we all know, what comes first is a priority.
Profit NEEDS to be a priority to you.

4 Steps to Profit First
Step One: Multiple Small Plates. You’re going to look at your five Profit First bank accounts like small plates at the dinner table. Bear with me–we’re going to relate this back to a lesson in the health industry. Small plates = five core accounts. Here is an example of the plates:
Real Revenue (income) Account – income minus materials and subcontractor(s) pay.
Profit Hold Account – A business doing a hundred thousand dollars in revenue, you should be able to put five thousand dollars away into the profit account.
Owner’s Pay Account – 50% should be allocated here.
Tax Hold Account – A business doing a hundred thousand dollars in revenue should put away 15%, or $15,000, for taxes.
Operating Expenses Account – A business should be able to operate on 30%.

Step Two: Vegetables First! This is something I know you’ve heard your doctor say. The first thing you should be eating at every meal is your vegetables. Same goes with profit. You always want to follow the sequence – allocate, distribute, and pay your bills.
If you’re not sure how to allocate money into the five accounts, don’t worry, that’s what a Profit First Professional does for your business. They determine the allocations percentages based on where your business’ financial health is right now. They do this by getting TAPs (target allocation percentages) figured out and implemented in a way to grow your business profitably.

Step Three: Remove Temptation! We like to take those five bank accounts one step further. Don’t just open those accounts at your local bank; set a couple of them up where you have to drive 30-40 minutes away. This removes the temptation to remove unnecessary money from those accounts.

Step Four: Be Consistent! Start by doing your allocation weekly. Then once you get the rhythm down after a few months, and you feel comfortable that you know when your money comes in and when you pay your vendors, then it’s recommended to go twice a month. Those days could be whatever days of the month you want them to be, but as a general rule, we say around the 10th and the 25th of the month.

If you want to improve here, we invite you to join our Profit First for Landscapers Facebook group. This group is where we share with you tips and tools you can use to implement the Profit First method in your business. With over 2100 members, we are growing this group in order to put an end to entrepreneurial poverty in the green industry.

Tags: Profit , Increase ,