Sometimes we try to do things ourselves because we think we have the skills and knowledge, but then it doesn't go as planned.

I've seen a few instances of this with Profit First setups, including my own. Let's consider a few examples.

Ever heard of the mechanic who doesn't service their own car regularly and has smoke coming out of the exhaust every time they drive off? Or have you booked your own holiday (not through a travel agent) and then something goes wrong, leaving you to make the phone calls and sit online for hours trying to sort out a canceled flight or an incorrect booking date?

Well, Profit First can be the same. I set up the bank accounts and decided on some pretty good percentages, or so I thought. I was determined to make it work, so I did weekly allocations to the different bank accounts. But I forgot two important parts:

1. I didn't account for all of the spending from each account, as our business is seasonal. I only looked at the last 3 months to work out percentages and not the last 2 years.
2. Different types of spending came out of the same account.

Digging into these further—Profit First is a system that needs to move with your business. It's not a set-and-forget system and needs to be regularly monitored and tweaked. When I first started, I assumed that the percentages would be set in stone and didn't want to change them because "I was right" and as an accountant, this should just work. But it didn't. I was running out of money in some accounts, causing more stress than I had before. This wasn't right. But I didn't want to change it. After consulting other Profit First professionals, I started tweaking percentages more often, which allowed me to put more money into the bank accounts we needed and reduce the stress. I now encourage reviewing the percentages on an as-needed basis, determined by your comfort levels to find what works for you and your business.

One thing I realized within several months of starting Profit First was that the operating expenses bucket as defined in the book was never going to work for me. Operating expenses are the bank account for the ordinary costs of running the business, such as paying rent, subscriptions, insurance, and staff.

However, it was the staff wages payments that stressed me out more than the bills. Having all of these costs in the same bank account meant that when bills were paid, there wasn't always enough for wages. So I set up a new bank account for wages, and now I can see that we always have enough for wages and to pay bills as well. The clarity of having the different types of spending allocated separately reduced the stress.

In the beginning, we had to delay paying some of our creditors by a week or two, but I was always confident we had enough to pay the staff.

Profit First is not a cookie-cutter, off-the-shelf system. For it to work for you and your business, you have to be willing to experiment to find what works and what doesn't. Understand what stresses you out and what you're calm about, and create the system that works for you while making tweaks and changes based on what is currently working—not just what you think should work because the book told you so.

If you have read the book and started Profit First on your own, well done! Take 20 minutes to review where you are and see if it is really working for you. Are you making the profits you think you should be? Are any of the bank account balances stressing you out (this can be too high or too low)? Do you need to adjust any of the percentages?

If you need assistance to work through any of these, please reach out to us.